The ETF Portfolio Strategist: 9 Jul 2022
Trend Watch: Global Markets & Portfolio Strategy Benchmarks
Several key markets bounced back this week, but it’s still far too early to assume there’s anything more than noise in the pop. Our proprietary trend indicators continue to recommend staying defensive on risk exposure. (For details on the methodology, see this summary.)
Yes, we’re starting to see some green again in the trend columns in the table below, which profiles our 16-fund global opportunity set (see here for details on all our strategy benchmarks). But the green is still limited to the shortest-period windows. Until the green starts spilling over to the long-run Trend 3 and Trend 4 columns, it’s best to remain cautious/neutral on allocations (unless you have an above-average appetite for high-risk speculation).
The strongest performer for the G.B16 universe last week: US equities via VTI, which rallied 3.2%. A solid pop, but it barely moves the needle in terms of providing convincing evidence that the downside bias has run its course (as VTI’s weekly chart below suggests).
Note that the rallies for the week were limited to half of the G.B16 universe. Year to date, almost everything remains in the red. The main upside outlier for 2022: commodities (GCC), although this is somewhat misleading, per the trend analytics in the table above suggests. For the moment, the tide for GCC has turned bearish after a stellar run. There are some intriguing scenarios of late from analysts that see a case for a revival in the commodities rally. Perhaps, but until we see support via our trending analytics, we remain defensive/neutral on the commodities space.
Our cautious outlook for the market components carries over to the strategic whole. All five of our portfolio benchmarks continue to skew negative in terms of the trend outlook. (See this summary of the strategy benchmark designs.) As with most of the underlying markets, there are signs of a recent reversal in the short-term strategy benchmark signals. Let’s see if that spreads to the Trend 3 window in the days and weeks ahead. Meantime, we remain skeptical that it’s time to fully embrace risk-on anew. ■