Bric strength for portfolio foundaition

Big Picture
North American recovery slows

Canada’s trade deficit widened to $1.13-billion in June, from $695-million a month earlier, as demand from the country’s key trading partners softened. Canadian exports to the U.S. declined 1% and exports to Europe fell 20%. The U.S. trade deficit in June was the largest since October 2008, widening by almost $8-billion as imports grew 3% and exports fell 1.3%. In July, the U.S. budget deficit reached $165-billion as Federal spending eclipsed revenue for the 22nd straight month, but was $98-billion lower than a year earlier. U.S. jobless claims spiked to the highest level in nearly six months.

Canadian housing starts slipped 1.6% last month, amid a cooling real estate market. Home prices were up just 6.8% year-over-year in the second quarter, compared with 16.6% in the first quarter. An opinion poll showed consumer confidence in developed countries lags behind developing nations – 85% of consumers in India, 77% in China and 65% in Brazil see their country’s economic situation as good, compared to only 18% in the U.S., 13% in the U.K. and 5% in Spain. Australia and Canada showed fairly robust levels of confidence around 70%. After narrowly avoiding bankruptcy in May, Greece is feeling the consequences of aggressive austerity cuts. Unemployment has risen to 12% from 8.5% a year earlier and GDP is down 3.5%.

Markets
Stock markets reverse gains

Rising jobless claims and trade woes sent U.S. stocks down 3.9% in three days, erasing about half the rally that began at the start of July. A report on soft factory data in China added to worries of a global slowdown. Cisco quarterly results disappointed, even though revenues rose 27%. Internet-based phone service Skype filed for its initial public offering and expects to raise $100-million. Google and Verizon, the second-biggest U.S. phone company, reached a deal that would restrict Verizon from selectively slowing or speeding Internet content, preserving “net neutrality,” that is, treating all traffic on the Internet equally.

General Motors posted its second straight quarterly profit, as it prepares to sell stock so it can end its dependence on the U.S. government, which has owned a 61% stake since July 2009. Canadian Tire reported a 15% rise in second-quarter earnings, on cost reductions and a 2.5% rise in retail sales. Sales at Rona building company rose 2.1%. Canadian companies spent $1.82-billion in online advertising in 2009, up 14% versus 2008, and should top $2-billion in 2010.

Sectors
Emerging Markets Strength

From a technical perspective we can look at the Claymore Bric ETF CBQ. This is a representation of the Brazil, Russia, India and China (Bric) which can be used as one proxy for emerging markets. In the last year CBQ reached a high of $31.54 and a low of $23.65. In July, the current price crossed above the 50 day moving average and more recently the current price crossed above the 200 day moving average but has not been able to hold its position above the later indicator suggesting resistance may be the longer term trend at the 200 day moving average. Both relative strength and moving average convergence divergence (MACD) are both positive with the lows and highs rising. This trend appears to have started in May so could be construed as a bullish trading signal. Given strength in consumer confidence and technical indicators, maybe its time to consider building your portfolio with some Bric.