Banks, represented here using the KBW Bank Index, ended up underperforming the the S&P 500 by about 375 basis points in 2014. Since the beginning of 2015, bank performance has been much worse.
The last several weeks has undoubtedly seen some major moves in asset prices especially in the commodity and currency spaces. Yet, relative to history volatility in most asset classes still remains below average with the exception of the bond market.
As we noted yesterday, the US stock market has been the only game in town recently. The S&P 500 is up about 8% over the year and the median stock in the MSCI North America is up 7%. Meanwhile the median stock in the MSCI World Index has not changed over the past year.
While the intraday performance trend of the stock market isn’t everything, it often gives clues to possible directional changes in the overall trend of the market. One of the ways we measure the intraday trend of the market is to count the number of weak closes over a period of time.
The United States stock market has been the only game in town. The US the only major developed country to have outperformed the MSCI World Index over the last year, joined only by the much smaller markets of New Zealand and Hong Kong.
Today the Swiss National Bank removed the CHF/Euro peg and the Swiss Franc shot up relative to the USD. In the chart below we can see the almost 15% drop in the value of the USD relative to the Swiss Franc.
Considering our focus on investing in the most intangible-rich companies in the world, it is no surprise that we follow investments in intellectual property very closely. Unsurprisingly, corporations in developed countries invest more in R&D, advertising, and firm-specific resources than their emerging market counterparts.
The MSCI All Country World index (MSCI ACWI) is comprised of two major sub-indexes: the MSCI World Index (80%) and the MSCI Emerging Markets index (20%). On a year to date basis, measuring average performance in USD, the best performing group of companies are from Turkey and the worst are form Colombia.
By almost any measure stocks are pricey relative to history. We’ll save the theoretical debate about whether such high valuations are justified for another post, and will instead illustrate with charts just how far valuations have come over the last five years. The Shiller P/E just made a new cycle high in December of 27.1x.
While negative five-year yields in Germany and Switzerland has been a feature for some time, Japanese yields have up until now resisted the temptation to go negative. Today, however, the Japanese 6-year yield crossed the line into the realm of negative yields.