Last week we wrote a few posts here, here and here noting the significant deterioration in EPS and sales growth estimates over the last few months.
To say that Greek banks are underperforming is more than a gross understatement of fact. The visual representation of that performance, however, is really quite stunning.
Imagine you had a plain vanilla $1 million equity portfolio that was solely invested in the S&P 500 and you were starting to feel a little nervous about stocks because of high valuations or deteriorating earnings estimates. How would you go about protecting yourself if stocks began to decline in earnest?
Markit’s PMI Manufacturing survey data released today showed little change in euro area countries’ headline readings, as most continued to hover around the all-important 50 level: The largest monthly improvement was in France (~2 points) while Ireland’s survey fell the most (~2 points), and no country came close to the three-point move posted by Austria
The average stock in the MSCI World Index fell by 1.2% in January. 11 of the 24 industry groups had positive price performance, led by pharmaceuticals, biotechnology & life sciences by a wide margin (5.1%). Food, beverage and tobacco (3%) and real estate (2.8%) were the second and third best performing groups.
Our basic proxy for global inflation continues to fall further. The year-over-year change of the CPI of 33 countries (using a simple average) has fallen for eight straight months and now sits at just 1.42%.
The Barclays US Aggregate Treasury total return index is up nearly 6% year-over-year. This index has a modified duration of 5.75 years. Not a bad return considering the on-the-run 5-year treasury is currently yielding 118 basis points.
For the first time in exactly one year, over half the stocks (51%) in the MSCI World Index are outperforming the headline MSCI World Index over the past 252 trading days (1-year). This is the highest percentage of stocks outperforming in exactly one year.
Looking across the global equity markets, it is clear that an asset allocation approach based on sector exposures has worked better than any geographic allocation. In particular, an overweight allocation to the health care sector would have benefited portfolios tremendously.
Relative to the All Country World Index (ACWI), only four European countries’ constituents have managed to outperform– Belgium, Denmark, Ireland, and Switzerland (for now): Country indexes for Germany, Netherlands, and Sweden remain in trading ranges: In aggregate, stocks in Finland, France, Italy, and Spain have declined on a relative basis for years– but recently rallied