The markets have finished down over the past week with the S&P 500 down -0.57%, the Dow Jones down -0.7%, international stocks (EAFE) down -0.82% and US Aggregate Bonds down -0.28%.
Top asset classes for the past week include Nat. Gas (7.19%), Timber (1.76%), and the US Dollar (0.94%).
Bottom asset classes for the past week include Biotech (-3.67%), Mexico (-2.95%), and Utilities (-2.48%).
Top asset classes for the past month include Oil (12.19%), BRIC (4.47%), and China (4.23%).
Bottom asset classes for the past month include Silver (-8.42%), Telecom (-7.6%), and Utilities (-5.7%).
Silver has been the biggest loser for the past month, with Telecom, Utilities, and Real Estate (all income-oriented stock classes) right behind it. Telecom and Utilities have continued their decline,after having surged earlier in the year.
Economic Strength Index (ESI)
Updated on a monthly basis. (Chart may not display correctly via email.)
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.
US equity markets end the week slightly down with the S&P 500’s return of -0.57%. Investors who have previously been heavy in defensive stock sectors such as Utilities and Telecom, and US real estate, have continued rotating out of those sectors.
Federal Reserve Chair Janet Yellen has also impacted markets with her commentary that the Fed is closer to raising rates this year. If the Fed should raise interest rates this year, many are eying a December increase.
Bond classes have also declined over the past week. Returns ranged from -1.09% for the Long Term Treasuries to -0.28% for the broader bond market.
There have been declines in several emerging markets over the past week such as Mexico (-2.95%), Russia (-0.65%), and Brazil (-1.99%).
I’ll continue this refrain as long as we’re at the top of the markets. 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.