Weekly Update

The BRIC is back?


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Published February 10, 2017

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Throughout the 2000s the BRIC countries – Brazil, Russia, India, China – were stock market leaders riding a boom in commodities driven by China’s expansion. Since that boom peaked in 2008, the group has been out of favor – flat at best, sliding in the case of Russia and Brazil, the two most sensitive to commodity prices. Recently, the BRIC looks like it just might be back as commodity prices get a lift. Most commodities are half or less their peak prices.

Copper is up almost +25% since the Presidential election with global growth hoping to benefit from relaxed U.S. corporate tax and spend policies.  The growth in the BRIC countries brings along the broader Emerging Markets who this week broke out to their highest level in almost two years.  China and India, neither of whom were initial beneficiaries of the election rally are up 6 of the last 7 weeks and have been rallying strongly in 2017.

A factor in the recent move higher for this group has come from a weakening U.S. dollar (shown at the bottom of Chart 1 below).  As the Trump administration has settled into office there has been more uncertainty about the speed and reality of some of the pro-growth ideas espoused during the campaign.  This has sent the U.S. dollar down from its initial burst post-election.

Chart 1 – BRIC countries are strong so far in 2017

BRIC countries are strong so far in 2017

Too soon to declare a new and powerful move higher for the BRIC countries.  But recent enthusiasm looks promising for this long-dormant investment theme.  To participate in this trend, follow our World Rankings here at the TimingCube site or our broader ETF rankings at ETFTide.


Market Update

Stocks found their way to new high ground this week as earnings season continued and President Trump promised a “phenomenal” tax cut announcement in the coming weeks. Monday, Tuesday, and Wednesday were all very limited in movement with broad market indexes moving no more than 0.2% across the three days as stocks awaited a new catalyst to push them above 2300 on the S&P 500. Oil prices showed more dynamically with drilling rig additions in 14 of the past 15 weeks and a huge build in oil inventories expected to keep a lid on oil prices. Earnings were announced from a slew of mid-level companies with the tone generally positive. The aforementioned tax cut comments came during Thursday’s session sending the S&P 500 leaping over 2300 on its way to a +0.6% gain. Stocks added another +0.4% Friday. Strength in oil prices in the face of the noted rise in oil inventories fueled a rebound in energy company shares late in the week. Market heavyweight Apple (AAPL) continued to trend upward after last week’s earnings surprise helping the Nasdaq, in particular, remain strong.

For the week, the S&P 500 rose +0.94% while the Nasdaq 100 lifted +1.35%. The Russell 2000 added +0.8% reversing losses early in the week.

Warm wishes and until next week.

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