SMID-Cap Gains, Growing Risk Appetite, and Emerging Trends in Yields
October 12, 2020 | FIRESIDE CHARTS
As we move off the S&P 500® Index’s best week since July, small and mid-caps remain down year-to-date but have gained significant ground in recent weeks. Risk appetite appears to be growing among investors—perhaps unsurprising in a historically low interest rate environment—and we’re noticing a couple of potential trends in yields, but time will tell if they’ll bear out and/or how long they’ll last. Finally, the USD’s recent weakness—it just fell to a 17-month low against the yuan—is giving a boost to commodities. Could it be enough for them to break out from a nearly decade-long downward trendline?
1. Small and mid-caps have participated as of late but have a long way to go to catch the big boys…
Source: The Chart Store, from 10/12/20
2. The U.S. trade deficit is now at the highs of the “great recession”…
Source: The Chart Store, from 10/12/20
3. Fund flows are indicating risk is back in vogue. Why? With yields near zero, are investors unknowingly or blindly taking on more risk? Is 80/20 the new 60/40?
Source: Datastream, Haver Analytics, Goldman Sachs Global Investment Research, from 10/12/20
4. Even for the risk-free 10 year UST, economics 101 still applies…large increases in supply have softened prices…
Source: The Daily Shot, from 10/12/20
5. Have long-term (40-year +) interest rate trends finally bottomed?
Source: The Chart Store, from 10/12/20
6. Commodities are trying to break out to the upside on the back of the USD’s recent ~10% decline…
Source: The Chart Store, from 10/12/20
7. The surge in the market weight of internet-related tech is not confined to the U.S. large caps; here is one EM index share:
Source: BofA Global Investment Strategy, Bloomberg, Datastream, from 10/12/20
8. How many “cups of ambition” do you need?
Source: Statista, from 10/12/20
Disclosure: The charts and infographics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be held in client accounts. Past performance is no guarantee of future results.