What Countries are Hot? What Should a Momentum Investor be Looking at Now?
In a previous whitepaper, we looked at using Momentum as a factor when investing across countries, and found it to be effective in generating outperformance vs. the benchmark.
As investors who are biased towards factor tilts, we thought it would be interesting to look at the relative performance of the 32 countries in our universe based on 3 basic criteria: Trailing 30 Day Return, Trailing 90 Day Return and Trailing 12 months Minus the Recent 30 Day Return. All returns are measured in Local Currency of the respective index.
The table below includes rankings of each country based on each individual factor, as well as a composite rank that is the average of the 3 factor ranks. In addition, just for the sake of completeness, we included the actual measure of trailing 90 Day Return so that readers could see how recent political events are affecting relative returns. This data is as of 8/4/14, and as such, reflects the increasing divergence of returns at a country level.
Over the past 90 days, Egypt is the best performing index, up 10.78%, and Portugal is the worst performing index, down -20.91%. That is a maximum/minimum range of 31.7%. Based on the composite rank, Egypt is the hottest market in the world, followed by India, Turkey, South Africa, Brazil and China. The worst performing markets are Germany, Russia, the Netherlands, Portugal and Austria. Turkey, China and Hong Kong have an interesting profile, with very strong returns in the last 90 days, but terrible longer-term performance. Greece, Italy and Germany show the exact opposite, with very strong longer-term performance, but very poor near-term returns. The US is now in the middle of the pack, after a 5 year run at the top of the performance table. The majority of the countries with high ranks are part of the emerging markets. That said, we also see countries like Russia, Chile, Poland, and Greece diverging significantly to the downside.
Currently, momentum investors should be looking at single-country ETFs that invest in Egypt (EGPT), India (INDY), Turkey (TUR), South Africa (EZA), and China (MCHI).
Disclosures:
This article was compiled by David Garff, a Portfolio Manager at Accuvest Global Advisors. This article is strictly informational and should be used for research use only. It should not be construed as advertising material. The opinions expressed are not intended to provide investing or other advice or guidance with respect to the matters addressed in this brochure. All relevant facts, including individual circumstances, need to be considered by the reader to arrive at investment conclusions to comply with matters addressed in this brochure. Charts and information are sourced from Bloomberg, unless otherwise noted. Remember that investing involves risks, as the value of your investment will fluctuate over time and you may gain or lose money. You should seek advice from your financial adviser before making investment decisions. Investment risks are borne solely by the investor and not by AGA. AGA is an independent investment advisor registered with the SEC. All disclosures, marketing brochures, and supplemental firm sheets are available upon request.
