Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

The ETF Portfolio Strategist: Another (Mostly) Down Week For Global Markets

By James PicernoStock MarketsSep 19, 2021 12:48AM ET
www.investing.com/analysis/the-etf-portfolio-strategist-another-mostly-down-week-for-global-markets-200602345
The ETF Portfolio Strategist: Another (Mostly) Down Week For Global Markets
By James Picerno   |  Sep 19, 2021 12:48AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Losses continued to weigh on global markets this past week

But not entirely. Another recurring feature last week: Japan stocks continued to lead the small set of winners for our global opportunity set through Friday’s close (Sept. 17).

GB 16 Ranked By Weekly Returns
GB 16 Ranked By Weekly Returns

For a second straight week, iShares MSCI Japan ETF (NYSE:EWJ) was top dog, posting a 0.9% gain. The fund was up for a fourth straight week and continued to end the session just below a record high (the fund was launched in 1996).

EWJ Weekly Chart
EWJ Weekly Chart

Some analysts see this as a catch-up rally. “Shares rose because some investors wanted to boost weightings of Japanese stocks in their portfolio. And there’s demand from those who failed to buy Japanese stocks in a rally earlier this month,” said Jun Morita at Chibagin Asset Management.

Whatever the reason, holding an allocation in the country’s equities is paying off handsomely these days—and at a time when global diversification generally is taking it on the chin.

Indeed, most of our global opportunity set was in the red again this past week. US junk bonds via SPDR® Bloomberg Barclays High Yield Bond ETF (NYSE:JNK), small-cap US equities—iShares Core S&P Small-Cap ETF (NYSE:IJR) and investment-grade corporates—iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSE:LQD) offered a bit of ballast, but otherwise there was no place to hide.

US stocks took another hit last week: Vanguard Total Stock Market Index Fund ETF Shares (NYSE:VTI) fell 0.5%, marking the second consecutive weekly decline. But US shares were still up a sizzling 18.4% so far this year and so excuse us if we’re not exactly worried at this point.

Nonetheless, there are some dark clouds on the horizon. Economic news continued to be mixed—Friday’s consumer sentiment reading for September, for example, reminded that Main Street was still cautious in a non-trivial degree. “The steep August falloff in consumer sentiment ended in early September, but the small gain still meant that consumers expected the least favorable economic prospects in more than a decade,” said Richard Curtin, Surveys of Consumers chief economist at the University of Michigan.

The main risk factor (still) was blowback linked to the Delta variant of the coronavirus. Some health analysts expect that this variant will peak soon, but until that forecast is confirmed with hard data, the future still looks shaky. Add in the fact that the US stock market isn’t exactly value priced and it’s easy to rationalize the case for taking some profits and trimming portfolio allocations, which are probably well above targets anyway after a strong run for American shares in 2021.

VTI Weekly Chart
VTI Weekly Chart

US stocks were squeezed last week, but the pain was great in Vanguard FTSE Europe Index Fund ETF Shares (NYSE:VGK), which tumbled 1.3%. Meanwhile, iShares MSCI All Country Asia ex Japan ETF (NASDAQ:AAXJ) fell a hefty 2.5% the past week. Thanks largely to China, AAXJ remained on the defensive and even lower prices were probably on the near-term horizon.

AAXJ Weekly Chart
AAXJ Weekly Chart

The latest point of worry for China is the news that Evergrande (OTC:EGRNY), one of the country’s biggest property developers, appeared to be a bubble that’s set to burst. “Evergrande’s collapse would be the biggest test that China’s financial system has faced in years,” warned Mark Williams, chief Asia economist at Capital Economics.

The biggest loser for our global opportunity set this past week: stocks in Latin America via iShares Latin America 40 ETF (NYSE:ILF), which fell a steep 3.0%. There’s not a lot to like here. ILF’s correction looked increasingly persistent. A key test awaits in the days ahead on whether the $26 range (the previous low) can hold.

ILF Weekly Chart
ILF Weekly Chart

All our strategy benchmarks took another hit

The US 60/40 stock/bond mix (US.60.40) suffered the lightest setback, easing 0.3%. That still left it up 10%-plus for the year so far. But with stocks feeling the heat for a second week, and US bonds treading water at best, this benchmark was having a rough go of it—an unfamiliar look for this yardstick.

The deepest setback for the strategy benchmarks: Global Beta 16 (G.B16), which holds the opportunity set (see table above) in weights detailed below. But broader diversification isn’t paying off lately.

By contrast, the equal-weighted Global Beta 5 EW portfolio (G.B15.ew)—which covers the globe with just five funds—was comfortably in the lead this year with a 12.5% total return.

Portfolio Strategy Benchmarks
Portfolio Strategy Benchmarks
Portfolio Strategy Benchmark Wealth Indexes
Indexes
Global Beta 16 ETFs Sectors
Global Beta 16 ETFs Sectors

The ETF Portfolio Strategist: Another (Mostly) Down Week For Global Markets
 

Related Articles

The ETF Portfolio Strategist: Another (Mostly) Down Week For Global Markets

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email