Equity allocators should take note that performance trends in North America are deteriorating while they are picking up outside the US. In the table below, I show the recent performance of the sectors within our KLSU North America index, which captures the top 85% of publicly traded common stocks, over $1, in North America. In the US, the energy sector continues to be the laggard.

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Next, I show Europe, where performance over the last several months has been twice as good as North America. The European energy companies outperformed 9/10 North American sectors over the last month.

Developed Asia has been the best performing region over the last several months. Again, the DM Asia energy sector outperformed all but 1 sector in North America over the last 3 months.

I have simple theory about managing a portfolio: find stocks that are outperforming the market and you’ll end up with a portfolio that outperforms. So, we try to identify the places where a higher percentage of stocks are outperforming.

In the next table, I show the percent of stocks in each sector outperforming the MSCI World Index over various time periods. It is easy to see the slow deterioration in North American performance trends. Whereas 50% of stocks have outperformed over the last 200 days, only 36% have outperformed over the last 20 days.

Trends in Europe are much stronger. Not only are 62% of stocks outperforming the MSCI World Index over the last 200 days, but recent trends are similarly strong with 60% outperforming over the last 5 and 20 days.

Lastly, trends in Developed Asia are the mirror image of North America. Only 38% of stocks have outperformed over the last 200 days, but more than 50% of stocks have outperformed over the last 5, 20 and 50 days.

Conclusions:

  1. Europe continues to have the best performance and breadth trends in the Developed World.
  2. North America is losing steam, with performance lagging and breadth deteriorating.
  3. Asia has experienced the strongest performance trends lately and an increase in breadth.

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