Let’s face it: the market volatility we’ve felt over the past few months has been just as uncomfortable as the weather here on the East Coast. Even though it is officially spring, we experienced snow showers just last week! We have had some warm, lovely 70 degree days peppered in here and there which isn’t too unlike the market action we’ve seen. Despite the uncomfortably high volatility in the market, it is important to note that we have not seen any substantial leadership changes at this point. In our Dynamic Asset Level Investing tool, otherwise known as DALI, US Equities remain planted in the #1 position, just as they have since August 2016. At this juncture, the spread between the #1 ranked asset class, US Equities, and the #2 ranked asset class, International Equities, has narrowed to just 13 signals. This is a relationship we have been watching closely, and one that we will continue to monitor.
From a sector perspective, Precious Metals, Oil, and Electric Utilities have shown near-term improvement; however, Technology and Healthcare have had the best year-to-date returns. Technology and Financials remain the top two domestic sectors in DALI as they were throughout 2017. Conversely, Oil Services, Real Estate, Gas Utilities, Building and Media have been the primary laggards, from a year-to-date return perspective. Internationally, we have seen notable improvement from some very niche markets like Egypt, as well as the broader Middle East and Africa; however, the long-term leadership continues to lie within the Asia-Pacific region.
Commodities, which ranks third in DALI, is the most improved asset class from a signal perspective, gaining 10 signals since the beginning of March. The improvement within Commodities has been led by Energy, with Gasoline and Crude being among the top three performers year-to-date. Cocoa has been the primary driver in Softs, and Cotton is also positive on a year-to-date basis.
Fixed Income remains behind Commodities as the fourth ranked asset class in DALI and — as they have since the beginning of February — International Debt and US Preferreds & Convertibles remain the top two ranked segments of Fixed Income. There was some downward pressure on yields further out on the curve in March, as the yield on both the 10- and 30-year U.S. Treasuries declined during the month, a reversal of the trend we had seen in the first two months of the year. Meanwhile, as expected, the Fed increased the target for the federal funds rate following its March, putting upward pressure on shorter-term yields, causing the yield curve to flatten – the spread between the two- and 10- year Treasury decreased by 12 basis points from March 1 to March 29.
As the first quarter of 2018 is in the rear view mirror, and we move through the remainder of the year, we will continue to monitor the markets for any potential changes in leadership and identify potential opportunities that may emerge. Be sure to stay up to date on these emerging trends in in our Daily Equity and Market Report, a comprehensive daily commentary available under the Research section of the Nasdaq Dorsey Wright Research Platform website. Additionally, we produce weekly analyst videos posted on Mondays and podcasts available via iTunes on Wednesdays.
- Click here to learn more about our SMA/UMA strategies.
- Click here for a free customized demo of the Nasdaq Dorsey Wright Research Platform.
Neither the information within this email, nor any opinion expressed, shall constitute an offer to sell or a solicitation or an offer to buy any securities, commodities or exchange traded products. This article does not purport to be complete description of the securities or commodities, markets or developments to which reference is made.
The relative strength strategy is NOT a guarantee. There may be times where all investments and strategies are unfavorable and depreciate in value. Relative Strength is a measure of price momentum based on historical price activity. Relative Strength is not predictive and there is no assurance that forecasts based on relative strength can be relied upon.
Unless otherwise stated, the returns do not include dividends or all transaction costs. Investors cannot invest directly in an index. Indexes have no fees. Past performance, hypothetical or actual, does not guarantee future results. In all securities trading there is a potential for loss as well as profit. It should not be assumed that recommendations made in the future will be profitable or will equal the performance as shown. Investors should have long-term financial objectives.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.