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Foreign Stocks Led Mixed Run For Global Markets Last Week

Summary:
Shares in emerging markets topped last week’s gains for the major asset classes, based on a set of exchange traded funds as of Friday’s close  (Jan. 8). Equities in developed markets ex-US were a close second-place weekly performer. Leading the winners: Vanguard FTSE Emerging Markets Shares (VWO), which surged 4.7% last week. The rally lifted the fund to a record high. The latest gain marks the fund’s strongest weekly advance since the first week of November. “There’s a lot of opportunity, a lot of risks, but I think emerging markets are really attractive right now,” says Ben Kirby, co-portfolio manager of Thornburg Investment Income Builder Fund. “Emerging market cycles tend to last several years,” he told CNBC on Friday. “Emerging markets have underperformed for quite a few years

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Shares in emerging markets topped last week’s gains for the major asset classes, based on a set of exchange traded funds as of Friday’s close  (Jan. 8). Equities in developed markets ex-US were a close second-place weekly performer.

Leading the winners: Vanguard FTSE Emerging Markets Shares (VWO), which surged 4.7% last week. The rally lifted the fund to a record high. The latest gain marks the fund’s strongest weekly advance since the first week of November.

Foreign Stocks Led Mixed Run For Global Markets Last Week

“There’s a lot of opportunity, a lot of risks, but I think emerging markets are really attractive right now,” says Ben Kirby, co-portfolio manager of Thornburg Investment Income Builder Fund. “Emerging market cycles tend to last several years,” he told CNBC on Friday. “Emerging markets have underperformed for quite a few years until last quarter, and emerging markets outperformed in a bull market. That’s interesting to us, so we think we’re probably at the early innings of what could be a sustained period of emerging market outperformance.”

But Henrik Gullberg, a macro-economist at Coex Partners in London, says rising US interest rates pose a challenge. “For emerging markets, higher US yields are a negative, so markets need to hear from the Fed that they will not tolerate an excessive rise,” advises Henrik Gullberg, a macro economist at Coex Partners in London.


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Despite the rally in stocks last week (US equities were the third-best performer), most slices of the major asset classes lost ground. The biggest loser: US real estate investment trusts (REITs). Vanguard US Real Estate (VNQ) sunk 2.2%, it’s first weekly decline in a month.

The Global Markets Index (GMI.F) rose for a second week, rallying 1.9%. This unmanaged benchmark holds all the major asset classes (except cash) in market-value weights via ETF proxies.

Foreign Stocks Led Mixed Run For Global Markets Last Week

For the one-year window, US equities are still leading the major asset classes. VTI ended last week’s trading with a 22.9% total return for the past 12 months. That’s moderately ahead of the second-best one-year performer: stocks in emerging markets via VWO, which is up 19.7%.

US and foreign property shares continue to post the only losses for one-year results. Vanguard US Real Estate (VNQ) and its offshore counterpart (VNQI) are down 5.6% and 6.3%, respectively, vs. their year-ago levels after factoring in distributions.

GMI.F is up a strong 16.0% over the past year, an unusually bullish gain for a multi-asset-class index relative to history.

Foreign Stocks Led Mixed Run For Global Markets Last Week

Ranking global markets by current drawdown continues to show that stocks, led by US shares (VTI), are leading in this corner with zero peak-to-trough declines.

At the opposite end of the spectrum: broadly defined commodities: WisdomTree Continuous Commodity Index Fund (GCC) continues to post a steep peak-to-trough slide of nearly -39%.

GMI.F’s current drawdown is zero.

Foreign Stocks Led Mixed Run For Global Markets Last Week


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James Picerno
James Picerno is a financial journalist who has been writing about finance and investment theory for more than twenty years. He writes for trade magazines read by financial professionals and financial advisers. Over the years, he’s written for the Wall Street Journal, Barron’s, Bloomberg Markets, Mutual Funds, Modern Maturity, Investment Advisor, Reuters, and his popular finance blog, The CapitalSpectator.

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