While I highlighted JP Morgan’s sexy charts in my last post,
now it’s time for my sexy charts. It’s
really a whole document, which
you can find uploaded here.
Aside from being more colorful and handsome, my weekly
charts attempt to capture the movements of multiple markets, how they are
performing relative to other markets, and if they are more risky
based on a historical metric I use, among other data. In short, I use it to identify trends in
broad based ETFs, so that we can apply that to our portfolio construction,
accordingly.
So here is a quick summary based on weekly data at the close
of November 15th and monthly data as of October 31st:
- It’s really amazing how the risk indicator has worked with domestic investment grade bonds. In October bonds rallied but failed to pierce the risk indicator. Since then bonds have moved down; though, did rally last week.
- And bonds have by and large had a positive return over the last 12 weeks.
- Another thing to note is the AGG (Aggregate Bond US Bond Index) chart. Look at that fall! But how much is AGG down over the last year? -1.71%. So really not that big of a deal in my mind. To me this indicates that even in rising interest rate environments (when interest rates rise bond prices fall), there is little risk of huge portfolio loss from holding bonds.
- Note, the duration (a measure of a bond’s sensitivity to interest rate changes) of the AGG is still under 5, so it’s not like there is huge interest rate risk holding AGG. This is different for longer dated bonds though.
- Munis still continue to suck wind against corporates, despite their recovery over the last 3 months.
- High yield has been relatively immune to the rise in interest rates. This isn’t surprising as high yield is usually negatively correlated with Treasuries.
- A recent trend of late is the outperformance of SPY (large caps) vs. IWM (Small Caps), which are actually flat over the last month. I wonder if this is the sign of a tired rally as typically riskier flare leads.
- Alternatively, Growth has outperformed Value over the last few months, which may be a short-term move, but is a directional change at least for the time being.
- Developed Market stocks are up, but are still underperforming SPY over the past 12 months (and every other period listed).
- Emerging Market stocks are all over the place. I love their valuation, but to me still seems like the trend is against them.
- Commodities in general seem to be consolidating, though Oil looks could be in a downtrend.
- The same goes for Real Estate. In my opinion, rising rates are probably more hazardous to IYR (Real Estate ETF) than to AGG.
The views and opinions expressed herein are those of the
author(s) noted and may or may not represent the views of Capital Analysts,
Inc. or Lincoln Investment. The material
presented is provided for informational purposes only. Nothing contained herein
should be construed as a recommendation to buy or sell any securities. As with
all investments, past performance is no guarantee of future results. No person
or system can predict the market. All investments are subject to risk,
including the risk of principal loss.
