Performance of Argentina’s Merval Index: Charts

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The equity market in Argentina performed very well last year and was one of the best performing frontier market. However this year has been a roller-coaster ride with the Merval Index falling to the 26,000 range from a peak of over 35,000 after the central bank raised interest rate to 40%, the third raise in eight days and the peso fell sharply. Since the plunge earlier this month, Argentinian stocks are recovering strongly after the country secured a credit line of  $30 billion from the IMF.

The 5-year return of the benchmark Merval Index:

Click to enlarge

The 1-year return of the benchmark Merval Index:

Source: Yahoo Finance

The key takeaway for investors is that frontier markets are inherently unstable than developed and emerging markets and sudden downfalls can occur any time. The current volatility in the Argentina equity market caught even the supposedly smart and sophisticated large investors caught off-guard. While those investors can survive a wipeout most small retail investors may not be able to stomach huge losses. So extreme caution is warranted with investing in frontier stocks.

Related ETF:

  • The Global X MSCI Argentina ETF (ARGT)

Related article:

Disclosure: No Positions

Global Penetration of Electric Vehicles by Country

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Sale of Electric Vehicles(EVs) is growing globally on an annual basis. The latest data show that global sales of EVs exceeded 2 million in 2016. Though this figure is tiny when compared to the annual vehicle fleet of over 1.2 billion it is still significant since it is growing rapidly.

The top country for EV penetration is China followed by the US. The chart below shows the global penetration of EVs by country:

Click to enlarge

Source: The road ahead for electric vehicles,  Manning & Napier

From the above article:

On a broader scale, while the global penetration rate for EVs remains very low, the recent growth in EVs should not be ignored. The latest data from the International Energy Agency shows that global EV sales hit a new record in 2016, with China—the largest market for EVs—accounting for 45% of purchases. This was more than double the sales in the second largest market, the US, which accounted for 21%. After being virtually non-existent just five years ago, the number of EVs on the road surpassed 2 million in 2016 (see accompanying chart).

Related Stock:

  • Tesla, Inc. (TSLA)

Disclosure: No Positions

Shark Attack: US vs. International Stocks

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Jeffrey Kleintop at Schwab has posted a fascinating article on the dangers and returns of international and US investing using the example of a shark attack.

The following is an excerpt from the article:

US and International

The chart below shows us what stock market shark attacks look like using the relative performance of US and international stock indexes. The lines are just one index divided by the other. When the blue line is rising international stocks are outperforming U.S. stocks. When the orange line is rising U.S. stocks are outperforming international stocks. They are mirror images of each other.

Shark attack: U.S. versus International

Source: Charles Schwab, Bloomberg data as of 5/13/2018.  Past performance is no guarantee of future performance.

In the early 1970s, the jaws were gaping wide. As international stocks began to outperform, the jaws began to close and take a big bite out of the portfolio of investors who hadn’t rebalanced. The jaws opened again in the late 1980s as the outperformance of international stocks became extreme, only to see them bite down again in the following years. Now, the shark’s jaws are open wide again after 10 years of U.S. stock market outperformance. We could again be on the cusp of a shark attack.

No one knows for sure if we have seen the peak of U.S. stock market outperformance of international stocks; the shark jaws could open wider before biting down. But the risk of a shark attack appears to us to be pretty high. Prepared investors should be thinking about being a contrarian and rebalancing their portfolios from the U.S. to international stocks after a decade of U.S. outperformance.

Source: How To Avoid A Shark Attack by Jeffrey Kleintop, Charles Schwab

The entire post is worth a read.