The natural tendency for investors in the US is to overweight US holdings. However, at times - like now, international equities are favored over the US because the asset class as a whole is performing well relative to US asset classes, as a whole.
Two popular and widely used ETFs are EFA (Europe, Far East & Asia) and EEM (Emerging Markets). The two largest holdings represented in the EFA are Japan and the United Kingdom, with a 22% and 21% weighting respectively. By contrast, the EEM's two largest country weightings are China and Brazil at 18% and 16% respectively. The relative strength relationship between EFA and EEM continues to favor EEM, telling me that emerging markets continue to outperform developed markets. However, by taking this analysis one step further, FRN (Frontier Markets) is exhibiting better strength than EEM. FRN’s largest country weighting is Chile at 31%.
It is this type of analysis which helps me to determine where to invest your funds. As I peel back the layers of the proverbial onion; international over US, emerging over developed, frontier over emerging…I am able to peer deeper into the international space and I can provide further analysis into where actual strengths may reside.
The trials and tribulations of the developed markets have been front & center in the news lately, suggesting a more defensive posture with respect to the developed and US equity markets at this time. On the other hand, we continue to see positive developments in the International equity space and superior strength still present in the Frontier and Emerging Markets.
Tuesday, August 31, 2010
Monday, August 16, 2010
Take a step back and look at the facts
After a day like Wednesday (8/11/10), which left many investors feeling a little rattled as the market exhaled, it is important to take a step back and look at the facts.
The financial headlines: "Global Fears Strike Stocks", "Market Woes", Stocks Tumble", etc. make an investor doubt their positions and convictions, for fear the sky is falling. But it's important to keep all rallies and declines in perspective.
Over the course of the past month the Dow Jones Industrial Average (DJIA) has gained roughly 1000 points, but with the Dow losing 265 points on Wednesday that rally came to an abrupt stop. To gain perspective on this decline I evaluated the longer term (100 point box) chart of the Dow. After attaining a high of 10,700 earlier this month, the Dow has pulled back to 10,400. Thus far, the pullback is a normal, and healthy, pullback within the confines of an overall positive trend for the DJIA.
There is no way to tell what the future holds however, by evaluating the underlying supply and demand relationship of tthe market we can gain some insight that might not otherwise exist, and is sorely lacking in the media reports.
The financial headlines: "Global Fears Strike Stocks", "Market Woes", Stocks Tumble", etc. make an investor doubt their positions and convictions, for fear the sky is falling. But it's important to keep all rallies and declines in perspective.
Over the course of the past month the Dow Jones Industrial Average (DJIA) has gained roughly 1000 points, but with the Dow losing 265 points on Wednesday that rally came to an abrupt stop. To gain perspective on this decline I evaluated the longer term (100 point box) chart of the Dow. After attaining a high of 10,700 earlier this month, the Dow has pulled back to 10,400. Thus far, the pullback is a normal, and healthy, pullback within the confines of an overall positive trend for the DJIA.
There is no way to tell what the future holds however, by evaluating the underlying supply and demand relationship of tthe market we can gain some insight that might not otherwise exist, and is sorely lacking in the media reports.
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