Over the course of the last week, there has emerged a surprising divergence between the performance of U.S. and global stock markets. Even as the U.S. stock market hit new highs for the year, many foreign markets have pulled back from their recent highs. In addition, the recent sharp pullback in the price of gold has hampered the performance of your holdings in Market Vectors Gold Miners ETF (GDX) and Freeport-McMoRan Copper & Gold Inc. (FCX). Finally, the 5%+ appreciation of the U.S. dollar against foreign currencies is acting as headwind against returns from foreign stocks.
Dragged down by the weak performance of China and other Asian markets, the S&P 500 actually has outperformed the MSCI Emerging Markets index by a hair over the course of the last three months.
That said, this is a rare occurrence and it is not something that I would expect to last. Foreign markets very rarely underperform the U.S. market for any length of time. It won’t take much for global markets to regain their superior momentum.
Virtually all of your Global Stock Investor positions are as technically oversold as they have been since July and are due for a bounce. Some of your positions are now trading off of last week’s lows, indicating that global stock markets may end the year on a high note.
Portfolio Update
The WisdomTree Dreyfus Chinese Yuan Fund (CYB) was flat this week. France’s Prime Minister urged China to allow the yuan to appreciate, saying that such a move would reduce China’s dependence on exports and raise consumers’ purchasing power. CYB remains a defensive BUY.
Claymore/BNY Mellon BRIC ETF (EEB) pulled back sharply this week, as the big emerging markets corrected. EEB remains a BUY.
iShares MSCI Taiwan Index Fund (EWT) ended the week slightly down. With Taiwan still off of its recent high of $13.12, “the Other China” remains a BUY.
SPDR S&P Emerging Markets Small Cap (EWX) ended the week slightly up, even as it also paid out a dividend of .75 cents per ETF on Dec. 18. This leveraged bet on emerging markets remains a BUY.
iShares MSCI South Korea Index Fund (EWY) pulled back slightly this week. South Korea’s financial market brought in revenue of 15 trillion won (12.7 billion U.S. dollars), after it was included into the FTSE Developed Market Index. EWY remains a BUY.
Freeport-McMoRan Copper & Gold Inc. (FCX) ended the week flat, after flirting with the $80 level at the end of last week. FCX remains a BUY.
Market Vectors Gold Miners ETF (GDX) continued in its correction mode this week, before bouncing slightly in yesterday’s trading. Technically oversold, GDX remains a BUY.
Market Vectors Indonesia ETF (IDX) crept back over the $62 level last week, before dropping back. There clearly is buying support in the market for the “new BRIC.” IDX remains a BUY.
Market Vectors Russia ETF (RSX) ended the week flat, just below the $31 level. RSX remains a BUY.
SPDR Dow Jones Intl Real Estate (RWX) pulled back this week, even as it paid out a dividend of 53.8 cents per ETF. This play on the global real estate recovery is now a HOLD.
iShares MSCI Turkey Invest Mkt Index (TUR) ended the week higher as this volatile market proved surprisingly resilient. TUR is a BUY.
Chemical & Mining Co. of Chile Inc. (SQM) closed above the $40 level last week for the first time this year, before pulling back. Trading in one of the most stable emerging markets in the world, SQM remains a BUY. Tighten your stop to $34.50.
Vale S.A. (VALE) had a solid first week in the portfolio, as it bounced sharply from a highly oversold position. This Brazilian commodity play is a BUY.
P.S. I will be taking a break from writing The Global Stock Investor Hotline next week. I wish you and yours happy holidays and a prosperous new year.
P.P.S. To keep up with my most recent views on global markets, sign up on Twitter on @NickVardy.
