Monday, May 19, 2008

Sectors and Styles Strategy Report: May 19, 2008

excerpts from this week’s report:

Model Growth Portfolio (MGP)
“What can I say? Yet another strong relative performance week for the MGP (that makes it 7 out of the last 8, 13 out of the last 15, and 15 out of 20 for the year) lifts the year-to-date relative performance results at another yearly high: +2.57%. If maintained for the full year, the MGP would beat the S&P 500 by 6.68%. Doubtful, but you never know.”

Model Growth Portfolio (MGP) Re-balancing
“Both adjustments in the MGP are largely influenced by the US domestic political scene...”

ETF Market Monitor
Econ. Sectors & Industries: Energy may have stolen the weekly performance spotlight but Basic Materials (especially Steel) and Semiconductors were the strongest winners.
Size & Styles: Mid Cap continues its recent outperformance tear. Micro Cap still lags considerably.
Global: One word for Brazil – caliente!
Other: Despite Energy’s continued strong performance, Commodities and Ag were big relative performance losers.

Expected Return Valuation Model
“The US equity market sits right around current fair value (-1.64%), thanks to the recent slight upward adjustment in 2008 expected operating earnings. In that regard, reality has finally sunk in with bottom-up analysts, as the data below shows with a drop below $90 thanks to a downward revisions to 1Q08. It should be noted, however, that bottom-up estimates still have a ways to go as second half earnings expectations are still on the overly optimistic side (see following table)…”

Moving Averages Scorecard
“Global markets led by emerging economies are where the best absolute strength resides (70% positive ratings). Further improvement puts the US economic sectors at the >50% level for the first time in many months. That said, Energy has reached an extreme level as the following chart shows…”

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