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Asset Class Returns As At 31 May 2013

This is highly interesting. As a test, if you were looking at the table what could you say or what kind of observations could you make. Not trying to be an asshole or "guru" here, but if you are honest about your knowledge of markets, the ability to synthesize data and tell a story, you should do well in financial markets. If you can't, then you shouldn't be, or are just plodding along. To be in the markets you can study, but you have to have passion for it. Make your own observations before scrolling down.
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- The one month data does not tell us much.

- YTD, the equity markets have been well led by the US, in fact emerging markets have been trailing ... suffice to say that most of the Asian markets which have been surging so far this year have been an anomaly, which further depresses the real performance of other emerging markets.

- We know the financial markets have been awashed in liquidity with QEs from various central banks, but where have they been headed. The YTD figures are again revealing, some have exited gold in a big way. Them taking money off gold may be just profit taking or likely to mean they are more comfortable that currencies won't be debased anymore, or that bailouts have finally went past a peak. The reduction of fear or volatility could be another reason.

- So where is the liquidity? They went largely into US stocks, US REITs and even foreign REITs. The REITs interest is but a reflection in a strong bottoming in property price correction and a resurrection of demand, and also a hint that people are more employable even now to take up new mortgages, and/or that a lot more PE/VC/vulture funds are taking advantage and making deals on distressed commercial properties.

- Look at crude oil, one month, YTD or 1 year even, that is a good reflection about the robustness (or lack of) of the global economic recovery. The recovery is benign and in patches still.

- Look at commodities, again the same conclusion as for crude oil, still working of excess inventory in the global system.

- Look at the emerging equity markets from 1 year ago, there has been a dramatic shift away from emerging markets back to US and possibly Japanese stocks. Again the robust performance of other Asian equity markets is very telling as it is viewed as largely unscathed and the equity markets there do attract sufficient interest compared to other emerging markets.

- The most important point one has to conclude is a drastic shift away from bonds of all kind. Bonds have been great on a 3 year basis but more funds are moving out. They move out because they either think there is a bubble there (too safe, and too many people willing to pay too high a price for low yields) and/or equity provides a better return even after accounting for risk.

From the above, I am quite confident that the current sell down in equities will be brief.




Comments

Big Sea said…
A clear signal ppl are leaving bond and gold.

A clear signal there is barely real growth in consumption yet.

Rally in US stock are either triggered by shifting of fund or expectation of future real consumption growth that normally lags.

It is good that we have a low base for commidity and oil. When inflation finally arrives it will not be that strong.
bruno said…
Friday's sharp reversal to the downside in the Japanese Yen against the greenback suggests that the Nikkei will be dancing to the upside next week.Time to join in the party.
bruno said…
Late last year I was saying that the Usd was on a multi year bottoming process and enroute to a multi years' bull market.Do not be surprised to see the Euro trading at 1.00 or lower,Yen at 1.25 or higher and Aussie at 60 cts or lower in the next few years.

Interest rates and currency markets trend for years and years.In fact they trend far,far and very far longer than commodity markets.

This time around,the Chinese property markets,the Pigg's with the EFC coming back to haunt and deflation(since the central bankers are cooking the books)will sink the markets.Then the nikkei and dow will be under 5k again.Some countries stock markets will close down indefinitely.Banks will be run and burnt to the ground.

I am usually not a fan of the precious metals.But it is time to seriously take a look at this market.Especially as it has now been badly beaten down,with gold bulls being converted into stock bulls.Silver is even doing worse.

The markets will tank.It is just a matter of time.Is three months enough time for the bears to muster enough energy to go bare knuckles with the bulls?

While the greenback will be king,the precious metals markets will make gold at all time highs of 1,900's look to cheap.Maybe that is the reason it is being called precious.
bruno said…
On Tuesday the dow was down over 150 pts in early trading,came back to be plus some before selling off again in late afternoon,to be down over 100 pts.

Today,the dow was up 120 pts in the morning,to sell off in the afternoon to end down over 120 pts.

Although the two days losses were around 250 pts,no big deal in a market that has gained thousands of pts,two days of late selling by smart money is something to take notice of.Could this be the start of a distribution phrase,which is very hard to detect as they usually come in small point loses in the beginning?
bruno said…
The dow had only one weekly gain in the last four.It is trying to carve in a lower high.Give it a couple more weeks to try for a higher high,if not it will most likely be taken to the cleaners.Nikkei has dropped into bear market(20%) territory.

Elsewhere the greenback looks like it is trying to set a bottom.Although the beaten up greenback has broken 200 days MA in some majors like the Euro and Swissie,it will most likely rally against these currencies next week,consolidate and keep on rolling.

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