The resilient bull market run of US equity markets in the third quarter was not felt around the globe. While US markets soared, man non-US markets struggled, especially in US Dollar terms. A steep acceleration in international growth in 2017 surpassed that of the US, but has decelerated in the last six months. Earnings expectations in China have fallen about 8% since tariffs were first announced, and Chinese stock prices have fallen even more. The largest downward earnings revisions since US tariffs were introduced actually have little to do with the trade war: both Turkey and South Africa have suffered dramatic economic deceleration and are looking increasingly likely to enter recession, dragging expectations lower in the Emerging Europe, Middle East, and Africa regions. In contrast, the rest of Emerging Europe and Asia (excluding China) has been relatively resilient. Earnings expectations in countries in the developed world have been surprisingly stable since the threat of tariffs was introduced.
The Saratoga International Equity Portfolio was essentially flat for the third quarter of 2018. On a sector basis, Energy holdings were the best performers on an absolute basis, while Healthcare holdings were the best relative performers. After being the top performing sector in the second quarter, Consumer Staples companies were the worst performers during the third quarter. Geographic region performance in the quarter was less varied than prior quarters with Emerging Americas as the top performing region, and Emerging EMEA (Europe, Middle East, Africa) as the worst performer. The Portfolio had favorable stock selection in four of the five regions with Emerging Americas having the best absolute returns. The Portfolio’s largest sector allocation on an absolute basis is to Financials while Industrials is the largest relative overweight sector. From a regional standpoint, Developed Europe is the largest absolute allocation, while Emerging Americas is the largest relative overweight.
Information contained herein was obtained from recognized statistical services and other sources believed to be reliable and we therefore cannot make any representation as to its completeness or accuracy. Any statements not of a factual nature constitute opinions which are subject to change without notice.
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