The Big Macro Landscape

The Big Macro Landscape continue to show a score lead for International assets. On average, funds from both Emerging Market’s as well as some more Developed areas are showing stronger scores than the average equity fund of any kind, but more importantly than the US Diversified equity fund average. This alignment is now over a month old and holding.  Early May was the time frame we saw these two groups (Emerging Markets and the All Global and International) take the #1 and #2 slots in this view. This makes this action very fresh, as well as very intriguing. The impact on an allocation that exposes to Non-US assets when Non-US asset are relative leaders is significant. The first part of the 2000’s was such a time-frame that you may want to go back and review.  In the short term we also see some up-ticking in the relative strength of Fixed Income. On the 30 day roll, they have up-ticked the most and this silent cross current may be important to monitor as well.  In any case it appears the US, Non-US and Fixed Income each have positives that you can use in your overall allocation for this summer.

If deference to “Extend” the Core Solution universe to be able to access some important parts of the International landscape, there is a need to expand the ETF universe to reach into the more stable of consistent parts that exist outside the US Core of the S&P 500 stocks.  I am working on the premise of the few, the broad, and the meaningful.  In the case of the International exposure, these few include basic global, core emerging markets and core developed markets.  And in additional to that, a low volatility version of those cores.  Though there are an enormous headcount of other funds you could use, I typically find that simple exposure from a few moving pieces works more consistently than a huge barrel of exposures flying around in an erratic cloud.  If the goal is to keep risks relatively under control and keep the consistency of your score readings relatively smooth, than you should be cautious on buying individual country or regional funds. Sure, niche areas can work for you by hand or in hindsight evaluation, but concerning a computer model, your main goal should be that the evaluation system does not get overwhelmed by noise or by cross currents among a slew of asset choices.  Yet still, I would like to hear your opinion on International ETFs that you have found very valuable in the thematic investing style that you use.