Strategic Global Asset Allocation Model – Update: May 2014

Strategic Global Asset Allocation Model: May 2014

Strategic Global Asset Allocation Model – May 2014


  • Trends in technology and small-cap stocks are changing
  • QQQ and SPY are no longer in the model
  • Countries like Spain continue to outpeform the S&P 500


Here in the US, markets have continued to expand their trading ranges. Tech heavy indices, like the Nasdaq 100, and small cap indices, like the Russell 2000, have started to break some of their upward trends:

qqqrussell 2000

Global Trends Are Changing

While we have yet to see if the longer, multi-year trends will break down within tech and small-cap stocks, global relative strength is starting to change.

Countries like Spain, which were undervalued by as much as 30% when compared to their European counterparts, have been steadily rising in 2014:

spain vs qqq

The relative strength model I use has been showing a greater interest in opportunities overseas than here at home. In fact, both the QQQ and the SPY failed to make it into the top ten of my strategic global allocation model.

Model Update: May 2014

Here is the over and underperformance of last month’s top ten:

april relative strength

For May, the ten strongest countries, as measured by relative strength, in the model are:

strategic global asset allocation may 2014


Looking Ahead

If the downward trend in technology and small cap stocks continue, we may see an increase in volatility as aggressive investors reduce margin levels in their portfolios.

Additionally, if overseas countries continue to show strong relative strength vs the S&P 500, investors may start to reduce their allocation to US stocks in favor of opportunities overseas.

Thanks for reading! If you have any questions or comments, please feel welcome to reach out. You can leave general comments in the comments section below, or reach out with more confidential questions via the contact page here.

-John Rothe

Relative strength analytics and charts provided by ETFreplay.

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