Aug 7, 2019

Cameron Hurst's Top Picks: Aug. 7, 2019

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Full episode: Market Call for Wednesday, August 7, 2019

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Cameron Hurst, chief investment officer at Equium Capital Management
Focus: U.S. equities

MARKET OUTLOOK

The team at Equium Capital sees a stark trade-off between global growth trends and the expected policy response from monetary authorities. Speaking plainly, this shouldn’t come as a surprise because conventional wisdom and historical precedent repeatedly illustrate the inverse relationship between growth and stimulus.

Notwithstanding modern monetary experience, market psychology recently entrenched itself in a belief the Fed would cut rates and increase policy accommodation at the same time as economic growth strengthened toward a long-term average pace. Betting on this double-joy tailwind, investors ratcheted up the earnings multiple they were willing to apply to S&P 500, which now trades at the upper end of its range since 2002.

Regrettably, the positivity of a lofty valuation dramatically contradicts the reality of current economic data. Last time on Market Call, we highlighted the seriousness of the New York Fed’s recession indicator, which continues to point towards slower growth and elevated odd of U.S. recession in 2020. Getting a little deeper in the weeds now, we point viewers toward global manufacturing PMIs, widely regarded as strong leading indicators.

Unfortunately, it’s a grim story. The aggregate “world” series is below 50, indicating broad-based economic contraction. Indeed, few countries remain in expansion territory at all. Adding to the litany of warning flags, Morgan Stanley’s recent summary of global PMIs, economic surprise indexes and financial conditions indicators presented today’s data versus readings in 2007 shortly before the financial crisis.

While too detailed to reproduce here, suffice it to say every single indicator was weaker today than before the worst recession in almost 100 years – and it was a robust list of more than 20 significant indicators of global economic momentum.

Our goal here isn’t to scare investors out of the market, but to highlight the need for sharpened awareness. In the absence of wildly irrational political sabre-rattling, we continue to believe investors have as six to 12 month window during which focused investments in the right areas can bear fruit, such as in real estate, gold, and selective secular growth exposures. Just be absolutely sure to use a disciplined exit process and don’t feel that cash must be immediately redeployed. Minimizing downside risk is paramount.

TOP PICKS

Cameron Hurst's Top Picks

Cameron Hurst, chief investment officer at Equium Capital Management, shares his top picks: the Real Estate Select Sector SPDR ETF; the iShares U.S. Medical Devices ETF; and the VanEck Vectors Gold Miners ETF.

REAL ESTATE SELECT SECTOR SPDR ETF (XLRE)

We maintain the market environment is more aligned with late-stage than mid-cycle timing and accordingly use real estate to balance portfolio risks, particularly on interest rates.

ISHARES U.S. MEDICAL DEVICES ETF (IHI)

Although we have reduced our healthcare exposure, we remain positive on medical devices as both fundamentals and technicals continue to be strong.

VANECK VECTORS GOLD MINERS ETF (GDX)

Although neutral on materials, we are positive on precious metals and specifically gold as fundamentals and technicals are positive.

DISCLOSURE	PERSONAL	FAMILY	PORTFOLIO/FUND
XLRE	Y	Y	Y
IHI	Y	Y	Y
GDX	Y	Y	Y

PAST PICKS: AUG. 7, 2018

Cameron Hurst's Past Picks

Cameron Hurst, chief investment officer at Equium Capital Management, reviews his past picks: the Health Care Select Sector SPDR ETF; the Alerian MLP ETF; and the Real Estate Select Sector SPDR ETF.

HEALTH CARE SELECT SECTOR SPDR ETF (XLV)

Then: $89.98
Now: $89.31
Return: -1%
Total return: 1%

ALERIAN MLP ETF (AMLP)

Then: $11.25
Now: $9.17
Return: -18%
Total return: -12%

REAL ESTATE SELECT SECTOR SPDR ETF (XLRE)

Then: $33.40
Now: $37.42
Return: 12%
Total return: 16%

Total return average: 2%

DISCLOSURE	PERSONAL	FAMILY	PORTFOLIO/FUND
XLV	N	N	N
AMLP	Y	Y	Y
XLRE	Y	Y	Y

FUND PROFILE

Equium Global Tactical Allocation Strategy

Equium Capital’s tactical strategy combines the best elements of traditional and alternative investing. The investment team views markets and investments through the unemotional lens of technical analysis and then supports those findings with bottom-up fundamental research. This conservative investment process minimizes risk by allocating capital only when and where managers find compelling risk/return opportunities. Accordingly, portfolios should be better protected during market declines while still participating during market upswings. This strategy is presently available in segregated accounts only.

Performance as of: July 31, 2019