September 17, 2018    Market Update

September 17, 2018 Market Update

Over the past week, both the major US indices and the digital asset market remained largely unchanged. There is however a far more interesting underlying story at hand if we look back at the year to date.

Before continuing further, I would like to thank the $PAC community for their continued support of my work and my appointment as $PAC advisor.  I will work tirelessly in my contribution to $PAC’s success.

Today instead of focusing on which cryptocurrency was hot and which was not, I am going to concentrate on core market drivers.

In the United States markets remain at or near all time highs, whether it be the media sector or equity markets. To date the US has been somewhat buffered to events affecting capital markets elsewhere in the world.

If I compare the Gold Market, Emerging Equity Markets, Emerging Currency Markets and Digital Assets Market a striking correlation becomes clearly apparent. The following charts will demonstrate this correlation.

The ETF illustrated in the chart below represents a basket of EM Currencies.  Note the high in January and the movement lower since March.

Charts Courtesy of Coin Market Cap and Barchart

The ETF illustrated below represents a basket of EM Equities. It reached highs in January and has been in a strong downtrend since March.

 

Charts Courtesy of Coin Market Cap and Barchart

 

Wait!! Gold Too?  The chart below clearly shows Gold following the same trend, hitting highs in January followed by a downtrend since April.

 

 

Charts Courtesy of Coin Market Cap and Barchart

 

If we move on to compare the above with the Digital Assets Market notice the high in January and the downtrend ever since.

 

Total Digital Asset Market Cap Courtesy of Coinmarketcap.com

 

Where did this capital release get reallocated to? Some of it definitely entered the futures markets as you can see from the chart below. SP Futures printed all time highs during the same period.

 

Charts Courtesy of Coin Market Cap and Barchart

 

As many will know a few weeks later US Equity Indices experienced the worst one day point drop ever. Note that all assets listed above experienced sharp rallies during the fourth quarter of 2017 attaining all time highs in January and February. Subsequently all were sold in large volume at a high velocity.  The most striking difference between the  asset classes above was that US Equities were able to recover since Spring.

These charts demonstrate how different asset classes can vary to such a large degree within the same time frame. It is also important to highlight how crowded some of these trades have become. At present, there is extreme value to be found in many of the asset classes I follow.

The NASDAQ is also near its all time high, whilst the vast majority of block chain related assets and cryptocurrencies are verging on their year low. Further disparity between US and non US asset classes can be witnessed in many international equities markets which remain in bear markets and in emerging market currencies which have hit multi year lows.

The above broad analysis of US and non US asset classes provides clear evidence of an opportunity to gather attractive assets at well below market valuation.

 

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