Twenty-three developed markets lost 4.4% on average this week, falling sharply for a second week in a row and a third week in four. All markets except for Italy (2.3%) fell, including 13 by at least 4% and five (Japan, Spain, Finland, Norway, Portugal) by at least 6%.
Author: Kenley Scott
Kenley Scott is a senior equity analyst and sector strategist covering the APAC region and the Energy sector. He is a member of the Global Focus List Committee, which approves all equity recommendations for developed, emerging, and frontier markets. Kenley also writes the Global Sector Summary, part of the Sector Strategy service, which identifies emerging sector strength and weakness across 46 countries every week. After working as a commodities broker, Kenley joined the firm in July 2006. He has a B.S. in Statistics from the University of California, Riverside and also holds a Series 65 securities license.
Developed Markets Resume Losses, Emerging Outperforms
Twenty-three developed markets lost 3.0% on average this week, failing to build on widespread gains in the prior week. All markets excluding Norway (0.3%) fell, including 12 by at least 3% and five (France, Germany, Italy, Denmark, Belgium) by at least 4.5%.
Steep January Losses Despite Rally to end the Month
Twenty-two developed markets gained 1.8% on average this week. It was the first week of solid gains this year, building on the rally from mid-week lows last week. Twenty markets gained, including 12 by at least 2% and seven (Japan, Hong Kong, Sweden, Denmark, Finland, Austria, Portugal) by at least 3%. Italy (-2.5%) still fell sharply, while Ireland was just slightly lower.
Oversold U.S. Energy Sector Highlights Global Bounce
Twenty-three developed markets were up slightly on average this week. Thirteen markets gained, including seven (U.K., France, Germany, Switzerland, Spain, Norway, Netherlands) by at least 1.7%. Of 11 markets that fell, four (Hong Kong, Ireland, Portugal, Singapore) lost at least 2%.
Global Sector Strategy with Kenley Scott – January 21, 2016
Kenley Scott, lead sector strategist for O’Neil Equity Research, will give an overview of current market conditions across the world, focusing on the deterioration over the last month. He will also discuss stock signals from a growth and general perspective, and review US market precedent to gauge if we are in the beginnings of a bear market or a continuation of the long bull market.
Market View
U.S. indices continued to slide this week, now testing the lows from August last year. The heavy selloff to begin the year has caused major technical damage in individual leadership, leading us to believe any sustainable rally will unlikely occur anytime soon. The majority of growth ideas will run into heavy overhead supply and resistance on any bounce in the major averages. We recommend lightening up in all later stage extended ideas on a shorter-term bounce, while rotating into stable defensive ideas that have been able to relatively outperform yearto- date. This defensive stance remains the best approach as this is not the typical pullback we have seen over the past few years. We remain watchful of secular growth as these ideas will eventually lead once volatility subsides and the market finds its footing. The market has now been in a Correction since December 11.
Global Selloff Accelerates, Majority of Markets in Bear Territory
The sharp global selloff continued this week with 23 developed markets declining 4.0% on average. Markets have lost over 8% on average in the past two weeks. All markets fell, including 14 by at least 4% and six (Germany, Denmark, Norway, Portugal, Ireland, Austria) by at least 5%. Only New Zealand and Switzerland fell by less than 2%.
Market View
U.S. indices broke all support levels in heavy volume this week. Large cap leadership that was propping up the market has now pulled back, while lagging sectors undercut their previous lows. The range-bound market has picked a direction, aided by a severe drop in oil and a ~15% drop in the Chinese market. With the market now trading ~10% off its highs, we advise a defensive approach, avoiding any buys until a new Rally Attempt begins and a follow-through day occurs. We moved the market back into a correction on Monday, after it undercut December 14 lows.
Global Sell-Off
Twenty-three developed markets declined 4.8% on average, as losses accelerated into 2016. The losses resulted in a majority of the indices turning negative for the trailing four-week period. Seven markets declined by at least 5%, and five (Austria, Germany, Hong Kong, Japan, and Norway) decreased over 6%. Japan’s decline of 7% was the worst-performing market, while New Zealand, down 0.7%, was the best.
Most Markets Down for the Year
Thirteen developed markets gained in 2015, however, adjusting from local currencies to U.S. dollars, just seven (Denmark, Ireland, Belgium, Finland, Austria, Portugal, Japan, Israel) gained.
