Stocks Overtake Commodities As Small-Caps Assert Strength
Healthy appetite for risk is being rewarded as global equities remain in rally mode
Portfolio Applications update: Our latest update to the Systematic Asset Allocation portfolios is now available.
Key takeaways: Global equities are back in the lead as commodities have stalled on both an absolute and relative basis. Within global equities, leadership remains with the ex-US components. Within the US, relative trends are favoring mid-caps and small-caps relative to large-caps (a trend we highlighted in last week’s update).
While the long-term trends for all of our major equity indexes are rising, it is notable that uptrends have been most persistent among the international indexes, followed by the US mid-caps and small-caps.
A rising trend has been in place for the ACWI ex-US has been in place for 64 consecutive weeks. Relative to the US, the ACWI ex-US has been rising for 70 weeks (and counting). The secular trend in favor of the US that emerged coming out of the Financial Crisis has been broken.
Strength from the rest of the world at the index level persists even as the number of global markets making new highs has contracted. In June, fewer than one out of five ACWI markets made new 12-month highs. Earlier this year 85% of ACWI markets were hitting new highs. Only about half of the ACWI markets are even above their 50-day averages at this point (this has been and remains the single black mark on our Bull Market Behavior Checklist). This is something to keep an eye on as narrow global rallies can be as fragile as narrow domestic rallies.
Right now that is not a concern in the US, however, as there is as much (or more) strength beneath the surface than at the index level. New highs continue to outpace new lows, the number of S&P 500 stocks above their 200-day averages is expanding and coming into this week, all 11 sectors in the S&P 500 are above their 200-day averages. The index tends to shine when sector strength is widespread (or totally absent).
One missing ingredient domestically
