For all of the handwringing about the direction of markets, the truth is that markets are stuck in a relatively narrow trading range. As a result, most of your current Global Stock Investor picks barely budged this week.
That said, the MSCI Emerging Markets Index is trading just below its 200-day moving average, a level it has been flirting with since the sell-off in May. If the index penetrates this level with some conviction, it could signal the start of a more sustainable upward move in global markets.
The stocks of both developed and emerging markets are almost as cheap on an earnings basis as they were when the market bottomed in March of 2009. Investor sentiment is almost uniformly negative. And the market seems increasingly immune to bad news — downgrades of Ireland and Portugal, Hungary’s tiff with the International Monetary Fund, and the possible negative outcome of European bank stress tests. All of these are bullish signs. Once emerging markets break out of their trading range, we could be off to the races. Until then, it pays to be cautious. And always be prepared for a pullback in the markets.
Our strategy remains to invest in the stock markets that are relatively strong performers. Having added the iShares MSCI Turkey Invest Market Index (TUR) and the iShares MSCI Taiwan Index (EWT) to your portfolio last week, Market Vectors Russia ETF (RSX) and Brazil’s resource giant Vale S.A. (VALE) now are flirting with their 50-day moving averages, which would be a signal for us to re-enter these positions.
Portfolio Update
Market Vectors Brazil Small-Cap ETF (BRF) ended the week 1.1% higher this past week, as markets rallied on positive earnings news. BRF remains a BUY. Raise your stop to $42.90.
The WisdomTree Dreyfus Chinese Yuan Fund (CYB) was flat this week. With the People’s Bank of China pledging on June 19 to let the currency trade more freely against the greenback, CYB is a BUY.
iShares MSCI Malaysia Index (EWM) ended the week flat after markets rallied sharply yesterday. Local investment bank CIMB Investment Bank Bhd. announced that Malaysia’s stock index may surpass levels reached before the start of the global financial crisis in 2008, as the government accelerates economic reforms and construction projects. EWM is a BUY. Raise your stop to $11.10.
iShares MSCI Taiwan Index (EWT) rallied yesterday on good news coming out of the technology sector about Apple’s strong earnings. This tech-heavy index is a BUY.
iShares MSCI South Korea Index (EWY) ended the week flat. With gross domestic product (GDP) growth expected to hit 6% in 2010, and trade surging 33% from last year, EWY remains a BUY.
Claymore/BNY Mellon Frontier Markets (FRN) rose 1.63% during the first week in the portfolio. With the balance sheets of frontier markets looking healthier than those of the United States, Europe and Japan, FRN remains a BUY.
CurrencyShares Japanese Yen Trust (FXY) jumped 1.13% this week, breaking above the $114 level. FXY will always remain a defensive BUY.
Market Vectors Indonesia ETF (IDX) rose another 1.49% this past week, closing at a record high of $76.88. As the strongest-performing market in Asia this year, IDX remains a BUY.
iShares MSCI Turkey Invest Mkt Index (TUR) rose 2% in its first week in the portfolio. With Turkey’s economy exploding during Q1 of this year at a rate of 11.7% — a higher rate than China — TUR remains a BUY.
PowerShares DB US Dollar Index Bullish (UUP) dropped back this week, as the dollar stabilized. This position will do well when global markets sell-off. For now, this position remains a HOLD.
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.
