The markets have finished up over the past week with the S&P 500 up 0.19%, the Dow Jones up 0.33%, international stocks (EAFE) up 1.61% and US Aggregate Bonds up 0.35%.
Top asset classes for the past week include Oil (3.96%), Mexico (3.8%), and Germany (3.35%).
Bottom asset classes for the past week include Nat. Gas (-5.73%), Telecom (-2.01%), and Agriculture (-1.1%).
Top asset classes for the past month include Brazil (7.59%), Biotech (7.33%), and Germany (7.16%).
Bottom asset classes for the past month include Telecom (-5.92%), Nat. Gas (-5.04%), and Oil (-4.46%).
While Telecom has been a strong asset class for most of the year, it was the biggest loser over the past month,
Economic Strength Index (ESI)
Updated on a monthly basis.
An ESI value of 45% indicates a:
The ESI’s current value indicates that the US economy is no longer in prime territory to support growth. While job numbers remain very strong and unemployment remains low several aspects of the US economy have begun to show their age in this market.
The levels of several indicators are still in fair territory (with a couple in optimistic territory), while others are far below average. Year over year growth rates amongst the indicators underlying the ESI are in the 21st percentile (0 to 100 scale). This, combined with the current value of the ESI imply that we may see more softening of economic numbers to come.
In the past week we’ve seen a lessening of the declines in the defensive sectors of the US markets, with telecom seeing further declines, but utilities and consumer staples having a flat week after a month of declines.
Bonds have rallied a bit from the recent pullback that occurred once US markets began moving toward new highs.
Meanwhile there continue to be significant rallies in several emerging markets such as Brazil and Russia. There is also continued strength in Germany.
It’s easy to become over-allocated to stocks when markets are making new highs and the volatility of the last year is seemingly in the rear-view mirror. However, in times like these (when markets are reaching new highs) risk is at its greatest, so it’s important to maintain a balanced outlook in your portfolio.