Why Is North America’s Equity Market Underperforming? - Knowledge Leaders Capital

Why Is North America’s Equity Market Underperforming?

August 23, 2017

By Steven Vannelli, CFA in Economy, Markets

On a relative basis, compared to the developed world, North American stocks peaked on November 23, 2016, and have since underperformed by about 4% (in USD). In the charts below, we compare the relative performance of our KLSU North America Index to various economic variables. Our KLSU North America Index captures the top 85% of the market cap in North America, is a market cap weighted index and USD based. Our KLSU DM Index captures the top 85% of the market cap of all 22 developed countries. It also is a market cap weighted index and USD based.

1. Auto sales have rolled over recently, having peaked at 18.05 million units in December 2016. The current run rate is 16.69 million units.

2. New house sales have stalled out. New house sales peaked in March at 638,000 units. July figures were released today showing sales have fallen to a level of 571,000 units.

3. Core inflation has slipped significantly lately, dropping from an annualized rate of 2.26% in January to a current level of 1.7%.

4. Driving the drop in inflation is the recent lower revision to compensation, which in turn caused a big revision down in corporate unit labor costs.

5. The US budget deficit is rolling over and beginning to widen again. After peaking at 2.21% of GDP in February 2016, the annualized budget deficit is now over 1% wider at 3.32% of GDP.

6. Lastly, it appears consumer confidence is waning, helping explain the weak retail figures we’ve seen.

Print Friendly, PDF & Email

Archives

Disclosures

The information presented here is for informational purposes only and is not to be construed as an offer to sell, or the solicitation of an offer to buy, securities. Some investments are not suitable for all investors, and there can be no assurance that any investment strategy will be successful. Hyperlinks may be included in this message that provide direct access to other internet resources, including web sites. While we believe these links are to reliable sources, Knowledge Leaders Capital (“KLC”) has no control over the accuracy or content of information contained on these sites. Although we make every effort to ensure such links are accurate, up to date and relevant, we have no control over pages maintained by external providers. The views expressed by these external providers on their own web pages or on external sites they link to are not necessarily those of Knowledge Leaders Capital.

The information provided on this blog is for illustrative or example purposes only and should not be construed as KLC’s opinion or investment outlook. As of the most recent quarter end, the named companies may have been held by KLC. For full information including additional policies and full disclosures, please visit our website: KnowledgeLeadersCapital.com.

Any reference to Index performance does not represent the performance of any investment product offered by Knowledge Leaders Capital, LLC. An investor cannot invest directly in an index. The performance of client account may vary from the Index performance. Index returns shown are not reflective of actual investor performance nor do they reflect fees and expenses applicable to investing.

Companies are selected for “Spotlights” based on high levels of innovation activities in their respective industries and illustrate innovation being employed across all sectors and geographies. Spotlight selection is separate from stock selection by the investment team. Spotlights are not necessarily representative of investment opportunities and can be selected regardless of investment performance or inclusion as a KLC holding.