The price of Brent crude is back above $100 a barrel. Government bond yields are rising nearly everywhere, with the 10-year yields of Australia and the UK both above 5.00% and the US’s at 4.97%. Either development would normally be enough to break a global bull market in stocks. Neither has so far. That's because corporate earnings keep climbing.
The Fed, the Bank of England (BOE), and the Bank of Japan (BOJ) all meet this week. The Fed's decision matters the most to investors’ appetite for global risk. The BOJ's decision matters the most for the yen carry trade, which seems to be unwinding now that the yen is back up to 153.47 per dollar and short-term interest rates are rising in Japan. That unwinding might partly explain the global bond market selloff.
Here's more:
I. Stay Home vs Go Global
The Go Global investment strategy is still working, and September has done nothing to change that so far. Brazil leads the country ETF rankings mtd at 6.0% in dollar terms, with South Korea at 4.3% and Poland at 3.3% (chart). The US ETF is down 0.4% mtd.
The ytd performance derby shows similar leadership, with a much wider spread. The South Korea and Taiwan ETFs are in the lead, up 94.1% and 74.6% ytd, respectively (chart). The US ETF is up 12.1%, behind both the All Country World (ACW) ex-US ETF at 15.1% and ACW ETF at 13.3%.
Within emerging markets, the Emerging Markets ex China ETF has pulled decisively ahead of the broader Emerging Markets one. The ratio of the two is just short of the record set earlier this year (chart). We have preferred the former to the latter for some time.
