Real Estate shines, stocks are still good, US stocks are even better.
The attached Relative Rotation Graph® shows the rotation for various asset classes (through ETFs) against the Vanguard Balanced Index fund (VBINX) on a weekly basis.
The picture is pretty conclusive for some asset classes but less so for others. Zooming in on the daily time-frame, usually, helps to add a bit more info and color to the weekly reading of the RRG.
The RRG of international stock markets relative to the FTSE all world index also paints an interesting picture for US stocks.
Summary
Weekly Asset Class Rotation
The weekly RRG attached to this article clearly shows the wide rotation for commodities (DJP). Based on the JdK RS-Ratio scale commodities is still the strongest asset class in this universe. The current drop on the JdK RS-Momentum scale should, therefore, be seen as a corrective move within the longer term rising relative trend.
The second tail that is interesting to monitor is the one of VNQ (Real Estate). High on the RS-Ratio scale dropping into the weakening quadrant and then a sharp snap back into leading again.
The fixed income related asset classes (IEF, HYG, LQD) and Stocks (SPY) are much closer to the benchmark (center) of the Relative Rotation Graph. Especially for SPY and IEF, this is to be expected as this is a, so called, open universe, and these two are the only markets included in the benchmark while the others are not which gives them more opportunity to move wide and far away from the center on the chart.
The fact that IEF is moving further away from the benchmark into the lagging quadrant while SPY is very close to the center and at a very short tail indicates that the Equity/Bond shift is more due to the weakness in bonds rather than the strength in stocks.
Daily Asset Class Rotation
The second RRG attached shows the same universe but on a daily time-frame, this gives more insight to the short-term rotational pattern of the various asset classes in this universe.
Starting with DJP again, we see that the drop on the JdK RS-Momentum scale on the weekly RRG has positioned DJP deep inside the lagging quadrant on the daily, but it has already started to move its way higher on the RS-Momentum axis here.
The position for VNQ is even more pronounced, on the weekly RRG it quickly rotated through weakening (from leading) back into leading, led by the rotation on the daily RRG and the same sort of rotation seems to be underway again on the daily now. This suggests that real estate (VNQ) will remain one of the strongest, if not the strongest, asset class in coming weeks.
The weakness of the three fixed income related asset classes is better visible on the daily RRG above. IEF and LQD are clearly inside the lagging quadrant while HYG is very close to the benchmark and as good as at the 100 level on the RS-Ratio scale.
Stocks (SPY), at the moment, is the only asset class inside the leading quadrant, but it is not very convincing.
The full article, including all ten charts and the case for US equities from an international perspective, can be read here:
http://stockcharts.com/articles/rrg/2016/07/real-estate-shines-stocks-are-still-good-us-stocks-are-e...
The picture is pretty conclusive for some asset classes but less so for others. Zooming in on the daily time-frame, usually, helps to add a bit more info and color to the weekly reading of the RRG.
The RRG of international stock markets relative to the FTSE all world index also paints an interesting picture for US stocks.
Summary
- Commodities are ready to move again
- Real Estate shining
- Avoid (Government) Bonds
- Stocks are a mixed bag but if you want some get American
Weekly Asset Class Rotation
The weekly RRG attached to this article clearly shows the wide rotation for commodities (DJP). Based on the JdK RS-Ratio scale commodities is still the strongest asset class in this universe. The current drop on the JdK RS-Momentum scale should, therefore, be seen as a corrective move within the longer term rising relative trend.
The second tail that is interesting to monitor is the one of VNQ (Real Estate). High on the RS-Ratio scale dropping into the weakening quadrant and then a sharp snap back into leading again.
The fixed income related asset classes (IEF, HYG, LQD) and Stocks (SPY) are much closer to the benchmark (center) of the Relative Rotation Graph. Especially for SPY and IEF, this is to be expected as this is a, so called, open universe, and these two are the only markets included in the benchmark while the others are not which gives them more opportunity to move wide and far away from the center on the chart.
The fact that IEF is moving further away from the benchmark into the lagging quadrant while SPY is very close to the center and at a very short tail indicates that the Equity/Bond shift is more due to the weakness in bonds rather than the strength in stocks.
Daily Asset Class Rotation
The second RRG attached shows the same universe but on a daily time-frame, this gives more insight to the short-term rotational pattern of the various asset classes in this universe.
Starting with DJP again, we see that the drop on the JdK RS-Momentum scale on the weekly RRG has positioned DJP deep inside the lagging quadrant on the daily, but it has already started to move its way higher on the RS-Momentum axis here.
The position for VNQ is even more pronounced, on the weekly RRG it quickly rotated through weakening (from leading) back into leading, led by the rotation on the daily RRG and the same sort of rotation seems to be underway again on the daily now. This suggests that real estate (VNQ) will remain one of the strongest, if not the strongest, asset class in coming weeks.
The weakness of the three fixed income related asset classes is better visible on the daily RRG above. IEF and LQD are clearly inside the lagging quadrant while HYG is very close to the benchmark and as good as at the 100 level on the RS-Ratio scale.
Stocks (SPY), at the moment, is the only asset class inside the leading quadrant, but it is not very convincing.
The full article, including all ten charts and the case for US equities from an international perspective, can be read here:
http://stockcharts.com/articles/rrg/2016/07/real-estate-shines-stocks-are-still-good-us-stocks-are-e...
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