What's On Tap...

2017 – Year of the Foreign Stock              

As we head into 2017 we leave behind a year marked by surprises. First, the continuation of the 2-year oil rout and subsequent recovery that saw oil prices plunge below $30 only to double from those levels today. Next came Brexit – with pre-vote polls showing a narrow but decisive victory for the stay party. However, when all the votes were counted, the leave camp eked out a victory, sending the pound and global equities tumbling. This was not to last as markets rallied into the U.S. election that brought yet another major surprise – a Trump victory and a U.S. equity rally to new highs on the back of a major bond retreat.

International markets diverged substantially - Emerging Markets posted the largest return differential of the year on 11/9/16; over 4% relative to the S&P 500. Developed Markets were barely able to post a positive year. One of the drivers of this move has been the incredible strength of the U.S. dollar, surging through the top of the 2+ year range in 2016.

Despite the strong bounce following the 2008 financial crisis, both developed and emerging equities have trailed the S&P by triple digits:

Performance of International since 2008:

Source: FactSet

Source: FactSet

Not all hope is lost as we have seen promising signs emerge from our quantitative processes. Our global strategies have keyed in on secular strength in countries such as Brazil, Russia, and Taiwan through the second half of 2016. Commodity-sensitive countries such as Canada and Australia began to enter the mix as well. In many of these cases, the underlying currencies have bucked the trend relative to the broader U.S. dollar strength.

We see this as a sign of improving global fundamentals that may be pointing to a broader reversal on the horizon. Already this year we have seen the strongest Euro-PMI in years, and a broad-based weak dollar move – the Euro has pierced 1.06 in today’s trading after closing 2016 below 1.04.

This confluence lines up nicely for 2017 and is our main focal point for the year within our Global Strategies; rising equity markets paired with appreciating local currencies is the best of all cases for foreign investments. 

 
          William Royer, Portfolio Manager

          William Royer, Portfolio Manager

 

Intended for investment professional use only

IMPORTANT INFORMATION: This material is for information purposes only. The views expressed are those of the author(s) as of the date noted and not necessarily of the Firm and are subject to change based on market or other conditions without notice. The information should not be construed as investment advice or a recommendation to buy or sell any security or investment product. It does not take into account an investor's particular objectives, risk tolerance, tax status, investment horizon, or other potential limitations. All material has been obtained from sources believed to be reliable, but the accuracy cannot be guaranteed.  We do not seek to endorse any investment products or financial services described herein.  Any information about a product or service should be confirmed with its sponsor.  Any remote links herein are provided only for your convenience and Braver Capital has no interest in, responsibility for, or control of the information on the linked website.  We make no promises or warranties, expressed nor implied, including the accuracy of and fitness for a particular purpose of the content on any linked website.  In no way will Braver Capital be liable for any damages resulting from use of these links under any circumstances.