European markets ended the week sharply lower as a slide in
commodity prices and a weakening in China’s manufacturing activity
for the fifth consecutive month triggered a selloff in global markets.
Indices in Germany (-6.5%), Sweden (-5.3%), Italy (-5.3%), Spain
(-5%), France (-4.9%), Switzerland (-4.8%), Finland (-4.3%), Belgium
(-4%), the U.K. (-4%), and Denmark (-3.3%) lost more than 3% for the
week.
Author: Neeraj Khanna
Global Focus Developed Long
The Australia ASX All Ordinaries Index fell 5.5% this week,
representing the largest weekly drop in three years. The index is now
below its 10-week moving average once again and is 2.2% from 52-week
lows.
Global Focus Emerging Long
Mainland Chinese markets plunged this week, with the Shenzhen and
Shanghai falling over 14% and 10%, respectively. Markets are now
in a Correction with an increased probability of more volatility to
the downside in the short term. Markets could retest the 24-month
moving average, which currently resides approximately 19% and 6%
below the Shenzhen and Shanghai, respectively.
Global Focus Frontier Long
Economic Summary
Fed hikes interest rate for the first time since the 2008 crisis; job market supports the decision.
First rate hike in nearly a decade.
The Federal Reserve hiked interest rate range by 25 basis points from 0.25% to 0.50% in
December, citing ongoing economic recovery and strong domestic spending. As per FOMC
minutes, the median Fed Fund rate projection is 1.4% by 2016 end.
US Focus Long
U.S. indices traded with increased volatility to close out 2015, rising sharply higher earlier
in the week, only to give up those gains on Wednesday and Thursday. Volume was again
muted, but is expected to pick up as we enter 2016, potentially pushing the market into
picking a direction. Despite this range bound trade, a select few individual growth ideas from
the U.S. Focus List have maintained constructive action, generating alpha regardless of little
to no support from the major averages. We remain bullish on these ideas and continue to
recommend holding into the New Year as long as distribution remains subdued.
• Our opinion has remained the same over the last few weeks. We see support for the S&P
500 at ~2000 and resistance at ~2116. Any breakout or breakdown will likely change our
mostly neutral view. The market is now 13 days off the bottom (12/14) and remains in a Rally
Attempt as we begin 2016.
European Focus Long
Europe’s main stock markets closed the last trading period of the year
with minor gains despite another decline in commodity prices and
comments by the head of the IMF, Christine Lagarde, that global
growth would be “disappointing and patchy” in 2016. Indices in
Denmark (+1.4%), Switzerland (+1.3%), and Belgium (+1.2%) were up
more than 1%. France (+0.30%), Germany (+0.15%), Italy (-0.18%),
and the U.K. (-0.20%) logged in minor gains and losses.
Global Focus Developed Long
The Australia ASX All Ordinaries Index gained 1.7% through
Thursday of this week, its third week of solid gains. It finished at its
second-highest weekly closing level since August. Despite posting 2.5%
gains in December, the index finished the year with slight losses. It
remains in a Rally Attempt, awaiting a follow-through day, but is now
back within 2% of its 40-week moving average.
Global Focus Emerging Long
Both Mainland Chinese markets fell over 2% through Thursday, with
volume remaining below average. Both indices logged one distribution
day, bringing the total to five for the Shenzhen and four for the Shanghai.
We continue to advise caution as we wait to see whether volume can pick
up to the upside.
