Global Markets Trends & Review Week Ending June 21, 2019

Global Markets Trends & Review Week Ending June 21, 2019

Global Markets Trends and Review Week Ending June 21, 2019

  1. Review of global markets starting with the US
  2. Performance chart of world markets
  3. Chart of China Large-Cap (FXI)
  4. Performance chart of major US market sectors
  5. Large-Cap (SP500) vs. Small-Cap (SP600)
  6. Sector highlight, US Rails Index,  Software Index, and Consumer Specialized Services
  7. Summary

Overview To Date: Since the December 2018 lows the S&P 500 had rallied about 26% making a new all-time high on May 1. The S&P 500 sold off during May about 8% as investors were rattled by negative news. Since the June 3 low, the market has rallied back strongly making a marginal new high.

One drag on the market has been interest rates. Concerns over interest rates abated some after last week’s meeting comments by US Federal Reserves. The comments were accommodative about a possible rate cut in July if the economy slows down. Investor focus shifts back to US/China trade talks and an upcoming meeting between Xi and Trump.

All of the world markets were up last week, and all have now their primary and short-term trends up. Investment uptrend signal (green) across all of the markets.

Performance comparison of the major world markets to SP500:  All the world markets were up last week.  China lead the way up 6%. Look at the chart, and see how strongly the markets have moved together since the May sell-off and the beginning of the rally starting around June 4. This is plurality and the move up together indicates continued strength in the markets.

China market index (FXI) Bellwether Market.  Continue to watch the China market as a bellwether indicator. The index had one of its strongest weeks in some time, up over 6%. It closed well above it 200-day moving average, another positive sign. China market results impact world markets and expectations about world economies and trade.

Relative Performance in the US market sectors: All eleven of the US market sectors were up. The top four were non-defensive sectors, Energy up  5.136%, Technology up 3.27%, Health Care up 3.16% and Communication Services up 2.91%.  While investors have been defensive since the December lows, money has started flowing back into non-defensive/growth equities. The Technology sector (growth) has been a market leader since June 3. Since June 3, Technology has been up over 13%.

Large-Cap (SP500) vs. Small-Cap (SP600):   While the S&P 500 made marginal new high last week, the S&P600 small-cap index has lagged. What is important to note is while the small-cap has not been as strong as the broader market, it is participating in the rally. This confirms the continued intermediate uptrend in the markets

Sector highlight, US Rails Index, Software Index, and Specialized Consumer Services Index:  When the markets are in a correction, it is valuable to see how different sectors respond. The review can indicate what investors think about the health of the economy and where the next investments opportunities are.

Products are shipped on railroads and railroads do well in a strong economy. Investors have shown concerns about a possible economic slowdown. The rails bounced after accommodative comments by the Federal Reserve for a rate cut in July. The concern is the rail index is still below its all-time high made May 1. It would be supportive of the broad market rally to see the rail index rally to a new high.

The Dow Jones US Software Index has been one of the stronger sectors but sold off with the Technology sector during May.  Software Index has rallied with Microsoft leading the way making a new all-time high on good volume.

US Specialized Consumer Services Index made another new high. There are some strong stocks in this group to watch.

Summary: From the December 24th low, the world markets started a strong rally. The market strength in US markets was confirmed by positive market internals not seen since the low in 2016.  Long to intermediate-term risk signal is ON projecting a continuation of the long-term bull market started in 2009. The June rally with strong market internals has turned the intermediate to short-term risk signal back to ON.

This remains a news driven market with nervous investors. Defensive sectors and stocks had lead growth sectors. Since the June 3 low, money has started flowing back into non-defensive (growth) sectors.

The purpose of this newsletter is to identify the primary trend of the major global markets. Good market investment returns are made by investing and trading with the primary market trend. US market internals and worldwide markets trends point to a continued positive investment environment in 2019. Conditions for support for continued uptrend: 1) Federal Reserve continues to be accommodative; 2) improvement in the Chinese economy and continued stimulus; 3) positive resolution of the US/China trade deal; 4) broader participation and strength in the small-caps. 5) No hard BREXIT (British exit from EU) where a hard exit is becoming more likely.

Note: the above are not trade recommendations, but possibilities to watch. The market is volatile and can swing sharply.

Posted in Global Markets Trends.