Greetings from the UK!
When we look at the relationship between the 6 major asset classes, Domestic Stocks, International stocks, Fixed Income, Currency, Cash and Commodities, International Stocks currently stands as our second most-favored asset class, a dash behind Domestic Stocks.
Our database monitors the relative strength relationship between each of these asset classes daily. Domestics stocks have not been the only game in town in 2023. In fact, Internationals have had a strong year and have resided near the top of our matrix most of the year.
Speaking with as many locals as possible while visiting this week, things sound dreadful if you listen to the average Brit. Our country is losing its relevance, the political landscape has been in tatters, the economy is stagnant, Brexit was a big mistake. Concern from people of various political viewpoints is palpable.
As for the market outlook, what does the FTSE index chart say?
Most international companies sold off in sympathy with the US markets in 2022 and the FTSE was no exception. From the October 2022 low a vigorous bounce took the FTSE to 8000 in February. Then the Silicon Bank crisis hit.
The UK has a small portion of its economy levered toward exports, while financials a large engine of the economy.
Fearing contagion, investors sold UK stocks off to 7300 in March, then retested that mark in July. A successful test off that level has the FTSE within striking distance of its early 2023 high.
Investors looking to add balance to their portfolio should consider International exposure in the right proportion – 5 to 20% of a portfolio for most U.S. investors. The dollar has been weak recently, boosting the returns of international stocks. Will this tailwind remain?
Perhaps a look at both the Pound and the Dollar will follow soon. In the meantime, the FTSE index remains in positive trend (column of Xs). While it appears technically healthy, we’ll of course monitor for any signs of deterioration after a strong rally. All clear for now, however, as has been the case for months.
(Featured photo is one I took of the Scottish Parliament building)