Investors aren’t limited to only investing in the S&P 500 and the Dow Jones Industrial Average. Every week we share the market trends we are following. We are interested in whether the trends in those markets are continuing or if they are experiencing a temporary or complete reversal.
When we identify trends, we are only concerned about the price data and what it says about any given market. We don’t need to know why a trend has formed to invest, but our human nature wants to understand what is driving them. Each week we try to offer some perspective on what we think the most substantial moves are and what critical drivers are behind them. Here we look at what is going in our globally diversified, non-correlated Crystal Bay Ubitrend strategy.
Last week’s continuing trends:
- Lumber
- Japanese Equities
- Indonesian Equities
- Chinese Yuan
- Copper
Last week’s reversing trends:
- Canadian Government Bonds
- US Government Bonds
- UK Government Bonds
- Silver
- Gold
What we are taking note of:
Indonesia receives little attention in US media or business circles, even though it is the 4th most populous country in the world, only 20% smaller than the US. It is also the 7th largest economy in the world by purchasing power parity, bigger than the UK, France, Mexico, or Canada. It has grown more than 5% per year for the past 20 years and even in the year of the global financial crisis in 2009, it managed to post a 4.6% increase in GDP. It is a remarkable success story that deserves better recognition.
Indonesia has avoided the worst of covid crisis so far. Indonesia recorded only 140,000 cases and 6,000 deaths; compare that with 5.6m cases and 170,000 deaths in the US, a country of a similar size. Indonesia’s economy shrunk by 5% in the 2nd quarter of 2020. For the full year 2020, it is projected to grow at about 1%, which is a step down from recent growth rates but much better than most other countries.
How are we heading into next week?
The Jakarta stock market rallied from its March lows but remains well below its January levels. It is still trading at mid-2016 levels and at one third of the valuation of the US market in terms of a P/E ratio.
The vast majority of US investors have zero exposure to Indonesia. Adding Indonesian stocks could improve the diversification and volatility of their portfolios. CBU currently has a long position in Indonesian Equities.
Jakarta Composite Index
