The US equity market leads the world in terms of market capitalization. At the end of 2016, listed US firms accounted for more than half of the global stock market value as shown in the graphic below. At the end of 1899 the US accounted for only 15% of global stock market value.
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Source: Credit Suisse Yearbook 2017, Credit Suisse
Gold prices closed at $1,280 an oz. today. After a few years of steady decline prices have been slowly climbing back up. In general, gold is considered as a safe haven asset as gold tends to be strong when equities fall. According to a recent article at Schroder’s gold does in fact performs well in weak equity environments. From the article:
If we look at history for guidance, then we see gold has the potential to perform very well in periods of stockmarket weakness.
Gold’s perceived “safe haven” status is well-supported with hard evidence. For example, if we look back at gold price performance between 1961 and July 2017 (see chart 1 below), it is very clear that gold price annual returns were positive, particularly during periods of high inflation, while stockmarket returns were negative.
We see no reason why this relationship should not continue in the future; an argument for holding a minimum weighting in gold or gold equities in a well diversified portfolio. It is important to remember, however, that past performance should not be used as a guide to future performance.
Source: Market complacency could bolster case for gold by James Luke and Mark Lacey, Schroder’s
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Disclosure: No Positions
The table below shows the Top 10 Most Liquid ADRs by trading value and trading volume year-to-date June 2017:
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Note: Russian oil giant Gazprom listed above is the DR trading on the London Stock Exchange(LSE). So it is not an American Depository Receipt(ADR).
Source: Depositary Receipt Services Midyear 2017 Report , Citi Depository Services
The US auto-parts industry is experiencing severe slowdown in recent months. Major retailers such as Autozone, Inc(AZO), O’Reilly Automotive(ORLY) and Advance Auto Parts(AAP) have seen seen their stocks decimated. These companies announced poor quarterly earnings and mentioned a variety of factors for their dismal performance. Some of these include high sales of new vehicles, warmer weather, oil prices, etc.
While the S&P 500 is up over 8% based on price year-to-date, the above parts retailers are off by double-digit percentages YTD as shown in the chart below:
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Source: Google Finance
Generally auto-parts sellers tend to be stable companies as sales boom during recession when consumers patch up their existing cars to keep them running longer while in expansionary periods they add additional accessories and replace parts when they wear out. However this theory is being tested in today’s environment.
Autozone stock has declined from over $791 per share to $510 this past Friday. It must be noted that the company does not pay a dividend and is purely a growth stock. AAP ‘s decline of about 45% just this year is indeed shocking.
Investors can continue to monitor stocks from this sector for better entry points. Nobody knows when the sector will bottom out. But catching the bottom is next to impossible. So getting in at some point in lower levels and holding them for a few years may yield excellent returns.
Disclosure: No Positions
Interesting fact: The Sahara is the world’s largest hot desert. It is almost as big as the USA.
Source: National Geographic
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