Yesterday marked a sharp drop in global markets, with the MSCI Emerging Markets Index dropping 4% and the MSCI EAFE Index markets falling 3.4%. Both of these broad measures of global stocks are trading below their 200-day moving averages.
Your defensive positions in your Global Stock Investor benefited from yesterday’s sell-off. Your bet against the euro through the UltraShort Euro ProShares (EUO), as well as on the rise of the U.S. dollar through PowerShares DB US Dollar Index Bullish (UUP) and the Japanese yen through the Currency Shares Japanese Yen Trust (FXY), all traded up this past week as global markets faltered.
The story on your stock positions is more mixed. Although many of your Global Stock Investor stock positions had been in the black, they fell into negative territory for the week on yesterday’s sharp sell-off. As I have said many times, when markets drop, investors “throw the baby out with the bathwater.” Although you are well positioned in some of the strongest global markets in the world — including the Market Vectors Indonesia ETF (IDX) and iShares MSCI Malaysia Index (EWM), both of which are positive for the year — there is no place to hide when markets hit a speed bump.
That all said, with U.S. consumer confidence numbers down and signs that China’s economy may be slowing, investor sentiment once again has shifted to the negative. That’s why I am moving several of your stock positions this week to a temporary HOLD and also raising some stop prices to limit your potential losses.
Portfolio Update
Market Vectors Brazil Small-Cap ETF (BRF) was up for the week until yesterday’s sharp sell-off. This position, more than the others, is all about global investor sentiment. BRF is now a HOLD. Raise your stop to $40.00.
The WisdomTree Dreyfus Chinese Yuan Fund (CYB) dropped back slightly this week. With Chinese revaluation of the yuan in the cards, CYB is a BUY.
iShares MSCI Malaysia Index (EWM) pulled back along with the rest of Asia’s markets. Malaysia’s Prime Minister Najib proposed $70 billion in new infrastructure spending to keep Malaysia competitive with its Asian rivals. EWM is a HOLD.
iShares MSCI South Korea Index (EWY) dropped sharply yesterday in unison with global markets. The weekend’s G-20 summit in Toronto made significant progress on a free trade agreement between the United States and South Korea. EWY is now a HOLD. Raise your stop to $42.00.
UltraShort Euro ProShares (EUO) rose 1.1% this past week, as the euro resumed its downward trend. With risk aversion back in the picture, and European governments’ cost-cutting measures just starting, EUO is a BUY.
CurrencyShares Japanese Yen Trust (FXY) jumped 2% this week, breaking out to a three-month high. When investors run for cover, the Japanese yen is one of their favorite places to flee. FXY remains a defensive BUY.
Market Vectors Indonesia ETF (IDX) hit a recent high of $74.42 last Friday before selling off in the last two days of trading, and ending the week flat. As the strongest-performing market in Asia this year, IDX remains a BUY. Raise your stop to $64.00.
PowerShares DB US Dollar Index Bullish (UUP) ended the week just about where it started. With market nerves rattled yet again, King dollar remains a defensive BUY.
P.S. If you want to keep up with my latest insights on developments in fast-paced global markets, you can now follow me on Twitter on @NickVardy or on my new blog, NickVardy.com.
