Asset Class Returns as At 31 March 2014

March brought another round of healing for assets in emerging markets. For the second month in a row, stocks and bonds in these nations posted handsome gains. Equities led the way in the first quarter’s closing stretch: the MSCI Emerging Markets Index advanced 3.1% last month, closely followed by government bonds in emerging nations, which added 2.8%. At the other end of the performance spectrum, stocks in developed markets led the red-ink parade by shedding 0.6% in March, based on the MSCI EAFE Index.

What was more interesting was the performance of US REITs, it gained 10% on a YTD basis. You would think that the general opinion of interest rates moving up soon, that REITs would under perform. Mind you, on a 2 year basis, US REITs have performed outstandingly already so we are not talking of a rebound from the rubble. The fact that it can eke out a significant 10% in just 3 months may lend credence to the emerging opinion that interest rates will remain benign despite evidence of economic recovery in the US and most places.
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For the moment, emerging markets are grabbing the crowd’s attention (and quite a lot of the investment flows)… again. So it goes when price momentum reverses direction in favor of the bulls. “I am not sure what has made emerging-market stocks so attractive to investors over the past few weeks, but many long-forgotten markets such as Turkey and Brazil are back above key moving averages,” notes a columnist for Barron’s. “And some, such as pan-Middle East, have been stealthily leading global markets for months.”
One theory for the latest buying spree in emerging markets is that the world suddenly looks a bit less threatening. “If there was any geopolitical risk, it’s calmed down and we’re showing some economic momentum,” says James Paulsen, chief investment strategist at Wells Capital Management. The change in perception, reasonable or not, appears to be reviving the crowd’s love affair with markets that have taken a beating before the latest mood swing kicked in. “The sentiment is becoming less negative at the margin for emerging-market equities,”observes Morgan Harting, a portfolio manager at AllianceBernstein. “At some point, valuation just starts to matter. The gap between emerging equities and developed equities had become extremely wide.”

Comments

bruno said…
Today,near the close I went short the S&P at 1890 basis cash.Will add at 1925,if the market ever gets there.

It will be no more than by the end of the second half before fat mama starts singing "Bye Bye Birdie" for the stock bulls.Remember one time I said that the NY Times writer wrote that 15-16 trillion of QE money pumped into the world's economy by Benny and gang,to yield just a meagre one trillion in additional output.Well,time is running out and by the end of June we will be seeing bulls squatting and wailing outside the watering holes around the world.
bruno said…
Why there is a very very good chance of the stock markets tanking in the coming days,weeks or months.

The feds under the guidance of 'Helicopter Ben' has pumped almost 11 trillion in the US and world economy.ECB,Bk Jpn and the rest of the gang around 5 trillion.The world's economy has managed to squeezed out an extra 1trillion.What has happen to the rest of the 15 trillion.Used to propped up the stock markets?

The federal reserve has so far trimmed 30 billion from it's tapering.If it stayed on course the QE will end sometime this year or latest early next year.Since the tapering started late last year QE has lost 60 billion,peanuts compared to the 11trillion already printed.

Will the smart money wait till end of QE before heading for the exits.The next few months will make more sense or senses.Smart money is no fool like the trend followers as they are the ones to start a new trend in the first place.

Many experts are calling for a really big bull market in the next few years and a real bear market in the bond market,as this recent bond bull market has a really good run since the subprime mess started.With interest rates inching up and a recovering economy,of course it is very easy to scream for a bear in the bond markets.

Interest rates,of course will rise in the next few months.So what?It will come down faster than it went up later in the third or fourth quarter.The bond bulls will run wild again and stock bulls will be on their knees crying out for their mamas.Then we can easily singled out who are the wailing bulls, outside the watering holes of this very small planet.

Like I said before do not be surprise to see the Dow at 5k or even below 3k.Just imagine what the KLSE will be.Then Genting,Sime Darby,KL Kepong and the crony blue chips can be had for a couple ringgit or maybe a ringgit or less.
bruno said…
I just went flat the Euro and SF for average 80 pips each.The short S&P trade yielded 20 pts.

I got stopped out on the short Aussie and Kiwi for 5 pips each.After NFP,these pair went the other way around.Have a wonderful weekend boys and gals.
bruno said…
Now that the markets have closed,it is time to do some serious homework,pondering and planning for the coming few weeks to a few months.And what better ways than looking back at the charts.

Will the stock markets make a new high.Maybe and most probably,but the round figure of 19k will be a brick wall for the Dow.

Why I said that time is running out for the stock bulls.QE since it started about half a dozen years ago have been a total failure,or in other words a total flop.

Why it is a total flop.QE has helped the too big to fail giants escaped failure,or rather bankruptcy and the rich and super rich get richer.It has also help the working class and poor get poorer and losing much buying power.And the elderly who are depending on their savings on interest with meagre income with O% interest rates.

Now the feds are on track to keep on tapering till QE ends the latest early next year.With no easy money to keep the momentum going,money from 401k are not enough to sustain the over leveraged players or markets.

Once de-leveraging starts and deflation rears it's ugly head,all hell will break loose.Bulls will stampede and trampled over each other.That will be the time blue chips can be had for a couple dollars to the bunches.It is when the buy and hold strategy investors will be many among the crowd wailing outside the watering holes of this small planet we live in.

I will definitely not be among the few surprised skeptics if the Dow were to end the year between 14k-10k.In fact I will be very shocked if it do not be near this levels at year end.
bruno said…
Out of sheer exitement that the markets will tank sooner than later,coming as soon or earlier than the end of the second quarter,I made a typo.Actually the Dow will hit a brick wall and the round figure of 17k will be a brick wall for the Dow.And most probably it will end somewhere in the middle of my forcast,12k.