1/ India to the Rescue
2/ What to Make of Natural Gas
3/ Defensive Sectors Ex. Utilities
Investopedia is partnering with CMT Association on this newsletter. The contents of this newsletter are for informational and educational purposes only, however, and do not constitute investing advice. The guest authors, which may sell research to investors, and may trade or hold positions in securities mentioned herein do not represent the views of CMT Association or Investopedia. Please consult a financial advisor for investment recommendations and services.
1/ India to the Rescue
Emerging market equity primarily consists of companies from China, India, and Taiwan. Using the MSCI Emerging Markets Index as a proxy, the 3 countries account for over 60% of the asset class. Post COVID, emerging markets have greatly underperformed the US stock market – this is primarily due to the bear market in China equity. However, the bear market in China is not spilling over to its neighboring market, India. The India stock market (priced in USD) continues to reach new highs on both an absolute basis and relative to US stocks.
2/ What to Make of Natural Gas
In just 8-months, Natural Gas witnessed both a failed breakout and failed breakdown on its price chart. It doesn’t get more frustrating than this for trend followers! By all definitions of trend, Natural Gas finds itself in a well-established downtrend. We saw price print lower lows in February and as of today, price remains below the October 2023 highs.
There are derivative indicators out there suggesting a change of trend is underway, such as the slope of the 200-day moving average turning positive. But price remains objectively in a downtrend. In my opinion, until we see Natural Gas trade above the October 2023 highs, there isn’t much to get excited about.
3/ Defensive Sectors Ex. Utilities
Large-cap Utilities have been on absolute tear in 2024 – but this doesn’t mean investors are risk-off or that defensive sectors in aggregate are set to outperform. We’ve witnessed periods through history where bond proxy Utilities are outperforming on a relative basis, but the broad market treks to new highs. To gain a better understanding we need to strip away Utilities and look at Consumer Staples and Healthcare. The below chart blends the equal-weight sector indices of Utilities and Healthcare and compares it to the broad market. I overlayed the VIX volatility index to highlight the response of defensive sectors when market vol spikes.
It’s clear, the relative strength chart is displaying zero improvement from a year ago. The recent uptick in defensive sector performance can be attributed to Utilities and not much else!
About This Week's Author
Shane Murphy, CMT has been a CMT Charterholder since 2022. He is currently a Wealth Management Associate at Michael Roberts Associates, Inc. where he assists in portfolio construction, investment research, and financial planning.
——————
Originally posted on June 4th, 2024
Disclosure: Investopedia
Investopedia.com: The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described on our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy. This information is intended for US residents only.
Disclosure: Interactive Brokers
Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from Investopedia and is being posted with its permission. The views expressed in this material are solely those of the author and/or Investopedia and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Disclosure: Futures Trading
Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.
Join The Conversation
If you have a general question, it may already be covered in our FAQs. If you have an account-specific question or concern, please reach out to Client Services.