At 360 Investment Research, we believe price is the manifestation of opinion and final arbiter of value. That is, price has the final say. It doesn’t matter if we think price should be lower or higher from a fundamental perspective. No matter the security (stocks, bonds, currencies, commodities, whatever), price determines value. Opinions don’t matter. Price matters. Period.
One of the exercises we go through is to look at equity indexes across the globe to see if we can find opportunities or confirm price action happening in the largest equities market in the world – the United States. If stocks in the US are making new highs, we like to see stocks making new highs elsewhere in the world. If the US market is doing well and so are some other countries, that bodes well for the global economy. However, if we see the rest of the world lagging behind, we find that to be a warning sign. We are currently in this situation now. When we look across the globe, all major indexes (except for Nikkei, S&P 500, and the DOW) are making new lows or lower highs. Not higher highs. Take a look at the chart summary below (click it to embiggen), which condenses charts of the most important stock indexes in the world (some are ETF proxies). It is quite telling. The Dow Jones, S&P 500, and the Nikkei (Japan) are the only indexes making new highs. We’d like to see more countries join the party by making new highs along with the US. Needless to say, we will be paying close attention to prices across the globe with a keen eye on the United States. You should be watching price action closely too.
Check back soon for part 4 in our 7 part series.