We are at an interesting crossroads right now. Our long-term behavioral model has indicated as in previous weeks that emerging market equity and fixed income are the best bets. More specifically our model is signaling to overweight India, Malaysia, South Korea, and Turkey and high yield and Investment grade bonds.
The country that received the lowest exposure is the United States equity market.
I make a point about the interesting crossroads because I see that bullishness in fixed income is moving toward unprecedented levels. Which at some point becomes a contrarian signal. However, the US equity market behavioral measure is signaling bearish sentiment. This means at some point the investment cycle of over weighting bonds (which to year to date has been the best move regarding the US) may end in the near future. But where to put the money when that time comes if US equity market is still signaling bearish sentiment. Well, we have confidence when that time comes our behavioral model will signal the correct steps to make. As of today, we will are still allocating to fixed income and emerging market equity.
Sunday, August 29, 2010
Sunday, August 22, 2010
Market Update 8.22.10
Last week our short-term US behavioral indicators signaled a down week last week. The S&P 500 was slightly down for the week. Given the week was slightly down instead of down big, our short-term US behavioral indicators have improved indicating to close the US hedge.
Our agent-based indicators still indicate the US is 18% under valued. However, the long-term behavioral indicator or sentiment is still bearish. The fixed income sentiment is still very bullish. We believe that there could be a bubble in fixed income since we have not seen such bullishness last for such a long time. Even though, we do not see signs of the bubble bursting anytime soon.
Our long-term plays currently are India, Korea, and Malaysia. In addition, we like fixed income markets in Emerging markets and the United States.
Our indicators indicate a relatively mild week of volatility.
Our agent-based indicators still indicate the US is 18% under valued. However, the long-term behavioral indicator or sentiment is still bearish. The fixed income sentiment is still very bullish. We believe that there could be a bubble in fixed income since we have not seen such bullishness last for such a long time. Even though, we do not see signs of the bubble bursting anytime soon.
Our long-term plays currently are India, Korea, and Malaysia. In addition, we like fixed income markets in Emerging markets and the United States.
Our indicators indicate a relatively mild week of volatility.
Sunday, August 15, 2010
Market Update 8.15.10
Last week was a pretty bad week for the global stock markets. What does the behavioral model indicate about what do for the coming week and beyond?
First, our US behavioral indicator has crossed it's short-term threshold indicating that this week will be a down week. Therefore, we are hedging our position for the week.
Second, our agent-based indicator indicates that the US is 18% under valued. The dynamics appear the US market will hover around 20% under valued for sometime. Therefore, we do not anticipate too much more downside. The worse possible scenario is 5% downside in the next month.
Our long-term perspective is still overweight emerging market equity and US high yield corporate bonds. Our indicators are also bullish on emerging market fixed income. We purchased some several weeks ago.
First, our US behavioral indicator has crossed it's short-term threshold indicating that this week will be a down week. Therefore, we are hedging our position for the week.
Second, our agent-based indicator indicates that the US is 18% under valued. The dynamics appear the US market will hover around 20% under valued for sometime. Therefore, we do not anticipate too much more downside. The worse possible scenario is 5% downside in the next month.
Our long-term perspective is still overweight emerging market equity and US high yield corporate bonds. Our indicators are also bullish on emerging market fixed income. We purchased some several weeks ago.
Sunday, August 8, 2010
Market Update 8.8.10
Nothing much has changed since our posting last week. As far as the US is concerned we are more bullish on the fixed income market than the equity market. We recommend a 70% bonds, 30% stocks for the US. For emerging markets, we are more bullish on the equity markets.
Emerging markets to look at are: India, South Korea, Taiwan, South Africa, and Malaysia.
Even though we have exposure to US bonds versus equity, we believe the US stock market is 14% under valued. However, that valuation will occur over the next year and half.
Emerging markets to look at are: India, South Korea, Taiwan, South Africa, and Malaysia.
Even though we have exposure to US bonds versus equity, we believe the US stock market is 14% under valued. However, that valuation will occur over the next year and half.
Sunday, August 1, 2010
Market Update 8.1.10
Based on our behavioral indicators our equity exposure to global regions are the following:
Asia 32.91%
Latin America 15.30%
Middle East, Africa 16.13%
Eastern Europe, Russia 15.65%
Japan, Australia 9.19%
Europe 8.84%
US 4.24%
Our US equity exposure is the lowest of all the regions. However, we do have 25% allocation to bonds which are invested in high yield US fixed income. We see bonds are still preferable to stock in the US market. Therefore, we high exposure to emerging market equity and US high yield fixed income.
Our agent-based indicators suggest the US is now 15% under valued and Europe is 20% under valued. Comparing this period to the recovery period after the 2000-2002 recession it will take until the end of 2011 to become fairly valued.
Asia 32.91%
Latin America 15.30%
Middle East, Africa 16.13%
Eastern Europe, Russia 15.65%
Japan, Australia 9.19%
Europe 8.84%
US 4.24%
Our US equity exposure is the lowest of all the regions. However, we do have 25% allocation to bonds which are invested in high yield US fixed income. We see bonds are still preferable to stock in the US market. Therefore, we high exposure to emerging market equity and US high yield fixed income.
Our agent-based indicators suggest the US is now 15% under valued and Europe is 20% under valued. Comparing this period to the recovery period after the 2000-2002 recession it will take until the end of 2011 to become fairly valued.
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