One Chart to Watch: U.S. & World Region Relative Strength during Sell-off

Read all of our Charts to Watch for the week of August 15th here.


It had been 6 months (January 22, 2014) since the MSCI All Country World Index experienced a 5% correction (or consolidation) in equity prices. Sell-offs in the midst of well-established bull market offer an opportunity to identify new market leadership and transitions in relative strength. Accordingly, we would note that the Energy sector was a leading se ctor in the US equity market coming into July 2014. Year-to-date through July 1st, XLE (SPDR Energy ETF) returned 14.24%, while SPY (S&P500 ETF) rallied 7.67%. Interestingly, Energy names (down 4.18%) have underperformed all other U.S. sectors during the most recent sell-off and subsequent bounce.

chart1 8.15


Furthermore, Europe was one of the strongest regions in 2013 (IEV up 24.12%), while Emerging Markets struggled to keep pace (EEM down 3.70%). Additionally, Latin America (ILF down 12.57%) and Asia ex Japan (AAXJ up 1.52%) struggled to find traction in 2013. Even in 2014, through July 1st, IEV (Europe ETF) led most regions, up 6.08%, with AAXJ (Asia ex Japan) up 5.67%, and EEM (Emerging Markets) up 5.24%. This European/Developed Market relative strength reversed during the July 24th to August 15th time period. Since July 24th, Asia ex Japan and Emerging Markets have outperformed, up 0.46% and down 1.00%, respectively. Meanwhile, Europe (down 4.22%) and the MSCI EAFE (down 3.08%) have underperformed.

chart2 8.15


disclosure: The opinions expressed in this Weekly Chart Book report are those of the author. The materials and commentary are strictly informational and should be used for research use only. This bulletin is not intended to provide investing or other advice or guidance with respect to the matters addressed in the bulletin. All relevant facts, including individual circumstances, need to be considered by the reader to arrive at investment conclusions that comply with matters addressed in this bulletin. Charts and information used in this report are sourced from Bloomberg.

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