End of Year Chart Update

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With the year almost ending and asset prices have rebounded strongly, we are becoming increasingly cautious on adding position to our core portfolio holdings and prefer to stay on the sideline until the next correction, at the risk of missing further upside moves. Technical and valuation point to an overbought and overvalued U.S. market alongside a very concentrated long position on commodity, especially copper. As this month’s piece outlined, we remain structurally bullish on select countries, such as Turkey, Chile, and Mexico and hold concentrated position on these countries’ equity unhedged.

Our recommendation to long copper from earlier this year to benefit from the cyclical forces has been well rewarded, but now we are net short on copper and are looking for a better entry point and moderation of speculative position before going net long again.

On equity, we believe there are still juice left on Mexican stocks and increase our core holding of Turkish and Chilean stocks, all currency unhedged. All these three countries stand to benefit the most from a global growth recovery and both their currency and equity are cheap.

Lastly, we are shunning U.S. high yield bonds in favor of EM sovereign dollar bonds, but maintain a bullish stance on equity vs bond.

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Published by Journeyman

A global macro analyst with over four years experience in the financial market, the author began his career as an equity analyst before transitioning to macro research focusing on Emerging Markets at a well-known independent research firm. He read voraciously, spending most of his free time following The Economist magazine and reading topics on finance and self-improvement. When off duty, he works part-time for Getty Images, taking pictures from all over the globe. To date, he has over 1200 pictures over 35 countries being sold through the company.

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