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Friday, December 02, 2016 8:59:54 AM
Are Emerging Markets Sending A Warning Signal For Cyclical Vs. Defensive Stocks?
* December 1, 2016
The abrupt jump in cyclical vs. defensive share price ratio appears to have been driven solely by external forces, i.e. the sell-off in the bond market, rather than a shift in underlying profit drivers. For instance, emerging markets (EM) and the cyclical vs. defensive share price ratio have tended to move hand in hand. The former is pro-cyclical, and outperforms when economic growth prospects are perceived to be improving. Recent sharp EM underperformance has created a large negative divergence with the cyclical vs. defensive share price ratio. The surging U.S. dollar is a growth impediment for many developing countries with large foreign debt liabilities. By extension, the growth impetus required to support deep cyclical sector profit outperformance may be elusive. As a result, we expect re-convergence to occur via a rebound in defensive vs. cyclical sectors.
https://blog.bcaresearch.com/are-emerging-markets-sending-a-warning-signal-for-cyclical-vs-defensive-stocks
• DiscoverGold
Click on "In reply to", for Authors past commentaries
* December 1, 2016
The abrupt jump in cyclical vs. defensive share price ratio appears to have been driven solely by external forces, i.e. the sell-off in the bond market, rather than a shift in underlying profit drivers. For instance, emerging markets (EM) and the cyclical vs. defensive share price ratio have tended to move hand in hand. The former is pro-cyclical, and outperforms when economic growth prospects are perceived to be improving. Recent sharp EM underperformance has created a large negative divergence with the cyclical vs. defensive share price ratio. The surging U.S. dollar is a growth impediment for many developing countries with large foreign debt liabilities. By extension, the growth impetus required to support deep cyclical sector profit outperformance may be elusive. As a result, we expect re-convergence to occur via a rebound in defensive vs. cyclical sectors.
https://blog.bcaresearch.com/are-emerging-markets-sending-a-warning-signal-for-cyclical-vs-defensive-stocks
• DiscoverGold
Click on "In reply to", for Authors past commentaries
Information posted to this board is not meant to suggest any specific action, but to point out the technical signs that can help our readers make their own specific decisions. Your Due Dilegence is a must!
• DiscoverGold
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