Tag Archives: global trends

This was the first semester… and these are some clues for the second

These are tough times for investors. We have already commented some of the weird phenomena that we are living in the markets, but the first semester was not easy at all to find good performances. Instability comes from several fronts:

  • EU: the ECB has no clue to solve the current troubles to make money and credit flow. Interest rates are negative, Euribor is also negative and the debt gives no return for investors. In the current unstable and volatile situation, investors prefer to pay instead of becoming profits from Treasury Bonds, specifically German ones. Finally, the black swan appeared: Brexit is there to stay.

Europe global trends in the first semester

  • USA: the Fed shows doubtful and indecisive. Markets have become mad and Mrs. Yellen prefers to delay the more-than-once announced (in Fed gobbledygook) rate hike. The presidential election also opens a new possible black swan, because a victory of Trump could cause another turmoil in the exchanges. The poverty of returns in the US markets is very clear with a figure: S&P 500 has produced positive returns YTD since Easter and its peak was under 4%.

USA global trends first semester

  • Asia: China sets the pace in the continent, but there are hard signs that the economy doesn’t grow as before. Exchanges reflect this low confidence and Shanghai performed erratic since the crash last August. The performance fluctuation band was between -15% and -25% YTD. Japan is also deadlock, because no policy obtains a positive outcome to get over the long economic stagnation of the country. This continent is the weakest for investors.

Asia global trends in the first semester

  • Latam: Although Brazil has experienced a great political crisis, investors acted more confident and the performance moves between 10% – 20% YTD. Mexico also shows a stable evolution in the markets, as the oil price has begun to rise.

Latam global trends in the first semester

This is the past and current situation, but where are the opportunities for the second half of the year? We do not publish forecast, but we can speak about trends.

Some days ago, BlackRock, the main ETF manager, decided to downgrade equities, because “stocks still face several obstacles”. Bank of America published a survey in which investors declared to bet higher for cash, peaking the highest allocation since 2001 in investment portfolios. Gold soared a 25% since January and volatility index VIX rallied this last month after a quiet quarter.

Times are hard to take investment decisions. The best one is no panic. Current volatility has to do with it and decisions under this pressure are usually wrong. Investors play for the long term. These are times to keep calm, avoid sudden changes and smart rebalance your portfolio.

Q1 confirms that instability is the rule in the markets

The closing of the Q1 in the markets confirms that this will be a complicated year for equities. The Great Crisis that the world lived since 2007-2008 is not ended at all, as there are some points of instability. Some of them are related to international politics: the shadow of terrorism, the wars in Middle East, the fight in the European Union and the US elections are some points to watch that affect the market evolution. However, there are also financial and economic troubles to solve: the ECB policies show that they are not enough to stabilise the European credit flows and return to some inflation, while the Federal Reserve stays cautious in the next steps to follow in its monetary policy. No one wants to be blamed of being a cause of a second big recession.

The T-Advisor charts show these statements. As we can see in the both charts below, comparing the general trend in global regions, there has been a positive evolution between the beginning of the year (above) and the end of the Q1 (below), but very slight apart from the Latam region:

T-Advisor global trends in January, 1st, 2016

T-Advisor global trends on April, 1st, 2016

If we check the evolution in each region, we can perceive much better the specific changes:

EUROPE

European stock exchanges evolution in Q1 2016

Besides the traditional parallel evolution amongst the European markets, it is also to underline that no main stock exchange registered positive returns YTD. The recovery from February was stopped by the instability created by the possibility of a Brexit (an independence of UK from the EU) and the terrorist attacks in Brussels, in the heart of the capital city of the European institutions. The ECB has also lots of troubles to make efficient their decisions, because its expansive policy has still no positive effects in the real economy to consolidate the general recovery.

AMERICAS

American stock exchanges evolution in Q1 2016

The trend is positive since the second half of January, but S&P Index was finally positive YTD in the last weeks of the Q1. The uncertainties related to the US election (no candidate is clearly heading the primary elections) and economic evolution make investors cautious. However, the announcement of the Fed about a delay in the next rate hikes was welcomed and consolidated the slight bullish trend.

The market behaviour was better in the emerging countries, although some evolutions are very linked to national decisions. For instance, the evolution of Argentinian Merval in March was erratic because of the agreement with the creditor funds, which was not totally assessed as positive by investors. In the case of Brazil, the cases of corruption in the Government have determined the ups and downs in Bovespa.

ASIA

Asian stock exchanges evolution in Q1 2016

The biggest markets (Shanghai and Tokyo) are really bearish and sum a very negative YTD return in this Q1. In China, the bubble broken last summer produced a hard landing in which the market is still moving. The trend is erratic or, better said, there is no trend. In Japan, there are worries about the global evolution, because the country has a great support from its exports. The doubts about the economy, underlined by the low oil price, and the instability of the exchange rate with the dollar are two hard reasons to be wary.

What can we expect in the Q2? We do not like to make any prediction or copy what others expect, but we prefer to alert about some relevant issues:

  • Look at the oil price: it is linked with the global activity.
  • Follow the Fed and ECB decisions: the Fed is progressively hawkish and the ECB should be more dovish to push the credit flow and inflation in the Eurozone.
  • Watch the Q1 profits of the companies, because they provide a guide about the economic activity.
  • Be wary about emerging markets: the dollar evolution (if the Fed hike the rates) can be negative for them.

Global market trends: What will 2015 bring?

November was an interesting month as developments in economy and finances brought some surprises: the main one is the drop of the oil prices, that positively affect to consumption, but it put at risk the economic viability of fracking and other alternative oil ventures. There is an open war between Arabian countries and other producers as US and Canada which colaterally affect Russia and Venezuela, for instance.

Global market trends in T-Advisor

Global market trends in November were quite positive. US stock markets are still in peaks. In Europe, after the volatile October, last month was better with the outlook of a soon action from the ECB. LatAm and Asia are also obtaining benefits from the positive stream in the developed markets. The trend change between October and November was very clear.

But what about 2015? What do experts say about the outlook for next year? Generally speaking, economic figures will be positive, as world expected growth will outpace the 3% bar, but IMF is pessimistic about recovering the former pace before the current crisis.

If we focus on different markets, the main detected trends by experts and entities are as follow:

  • USA: it is taken for granted that the Federal Reserve will increase rates. This decision will strengthen the dollar as currency against euro and others. It is also expected that US will be again the engine for the economic development in the world. Opinions about market evolution are also positive, although prices are in historic records.
  • Europe: the point in the Old Continent is quite different. US abandon the expansive monetary policy and Europe is adopting it. There is an internal fight amongst some EU members (mainly Germany and France) about the next steps. Poor economic projections affect France and Italy, which are pressuring for quicker monetary policy decisions to boots their development.
  • LatAm: many of these countries are depending on commodities and foreign investments. Brazil is again in recession, Argentina still fights with its eternal debt troubles. Next US rate hike and a more expensive dollar will make this region more volatile.
  • Asia: Abenomics in Japan are not working as expected. Japan lives also an eternal stagnation and next election will surely not solve anything. Two key countries will also have important developments next year: China and India. China presented last months mixed figures about economic progress, while Modi’s government is expected to favour business, making India a stronger economic pole in the continent.

World global market trends in May

Markets improved slightly their bullish trend, always with very low ratios, as there are still doubts amongst the investors about the strength of the economic recovery, mainly in US. There is also another ingredient in this financial mixture: US markets are touching their highest levels and many analysts are wondering when the correction will come.

Global market trends in T-Advisor

US market trend in T-Advisor

But the eyes are on Europe. ECB meets tomorrow to take possibly historical decisions in its monetary policy. Low inflation figures are warning European authorities about the risk of deflation. One of the main points is the exchange rate with other currencies. Europe is importing deflation with the high rate against dollar and others and exporters are suffering to sell abroad, apart from the deeper trouble: the credit restrictions. These problems have effects in the economic development and employment perspectives. The fear is that the ECB will not be tomorrow brave enough and disappoints the markets, which are really expecting many measures, not only a rate cut.

Europe market trend in T-Advisor

The bullish trend improved also slightly in Asia. The main news was the election of the conservative Narendra Modi in India as prime minister. Markets have high expectations about him and Indian market experienced a strong bullish trend this month, so T-Advisor figures. The results of the election in Indonesia were also positively welcomed by the investors. However, Japan and China carried on their weak market trend.

Asia market trend in T-Advisor

Finally, LatAm showed the best trend in world markets pushing by Argentina. Its government announced an agreement with its lenders to pay the debt. Argentina was the instability focus in the lasts years in the continent and the deal about the debt opens new expectations for investors. On the other side, Brazil remains quite weak.

LatAm market trend in T-Advisor

World global trends: bearish o bullish in February?

February is usually an unstable month for the markets. In this case, emerging markets have suffered more from this instability. We have already spoken about it before. The current quantitative easing cut made by the Federal Reserve affects negatively the capital flows to these countries.

T-Advisor charts show clearly these global trends. Although general markets are not specially bullish, the bearish trend is harder in Asia and Latin America:

Global trends february by T-Advisor

Even more, the worst markets in our list (from the last) are Peru, Brazil, Japan, Chile, South Africa, Mexico and Turkey. With the exception of Japan as developed country that is living some different conditions, the others are emerging markets mainly in Latin America.

Global trends LatAm by T-Advisor

Emerging Asian countries are a bit better that always in a bearish trend:

Global trends Asia by T-Advisor

In this case, the drop begun last year in June. Although the line was stable in the autumn and the beginning of the year, it registered a new hard decline in February.

Just to compare: Latin American countries quoted before have less than 20% of their listed companies with a bullish trend (in Peru and Chile, less than 9%), while Asian countries as China, Singapore, India and Hong Kong have between 20-25%. The only exception in this trend in emerging markets is Argentina, with some different components in its economy.

At the top of this list, the leaders were continuously in February the denominated PIIGS (Portugal, Italy, Ireland, Greece and Spain). Their markets, as we published before, were cheap for investors and attracted capital flows in their exchanges. In these cases, they had always bullish more than 40% of their companies (in Portugal, up to 60% or a bit more).

This kind of charts helps investors to detect risk and investment chances in the current pricing of the markets.