Chalk it up to strength of the US dollar, trade, policy risk, or whatever, stocks outside of the US are in bad shape. One of the ways we systematically measure the relative attractiveness of a stock in a particular sector, region or country is to calculate the percent of stocks in a group that are currently flashing a red performance alert. A performance alert is activated when a stock has a combination of negative short-term, intermediate-term and long-term trends relative to the global equity market and it is a strong indicator that a particular issue is at risk of further underperformance. At the same time, we calculate the percent of issues with a positive overall trend, which helps us identify areas of relative strength.
So just how much riskier, as measured by our performance alert, are trends outside the US than inside? In the US, only about 28% of stocks are flashing a performance alert, which is a relatively modest number. The sectors with the fewest performance alerts (least risky by this measures) are real estate, energy, health care, and utilities, while those with the most performance alerts are materials, telecom and staples. By far the sector with the highest percentage of positive trends is tech, which is no surprise given tech’s outsized leadership over the last several years.
In developed markets excluding the US, things get a lot dicier. More than half of these stocks are registering a performance alert and only 19% of them have positive trends. Only three sectors have fewer than 50% of stocks registering performance alerts: health care, energy and tech. In other words, picking stocks in DM ex US is not for the faint of heart.
DM ex United States