Value and Momentum: July 2014

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One strategy we use to enhance Basic Strategy is to tilt client portfolios toward asset classes that are more attractive based on value and momentum measures.

Let’s look at what this analysis tells us this month.

The following chart shows the value and momentum scores for the ten broad asset classes we consider. The upper right area is the ideal spot for an investment, indicating both attractive value and positive momentum. You can see that value and momentum are usually opposites, with most investments attractive in terms of one, but not both.

Value-Momentum-2014-07Source: Mariposa Capital Management, LLC

As of 7/9/2014, the two most attractive asset classes using value and momentum are:

  1. Global Commodity Stocks
  2. Emerging Market Stocks

The most unattractive asset classes are:

  1. Commodities
  2. US Real Estate


For this analysis, we are using the following funds as proxies for each asset class.

Asset Class Fund Ticker
US Stocks Vanguard Total Stock Market VTI
Foreign Stocks Vanguard FTSE Developed Markets VEA
EM Stocks Vanguard FTSE Emerging Markets VWO
US Real Estate Vanguard REIT VNQ
Foreign Real Estate Vanguard Global ex-US Real Estate VNQI
Commodities PowerShares DB Commodity DBC
Commodity Stocks SPDR S&P Global Natural Resources GNR
US Treasuries iShares 7-10 Year Treasury Bond IEF
Cash iShares Short Treasury Bond SHV

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