Rarely have we seen a condition of such clearly defined and broad based trends in world financial markets! Virtually everything within each asset class and between asset classes is confirming each other. We have multi-month highs in equities, commodities and corporate bonds, multi-week lows in Treasuries and near multi-week highs in high yield currencies. The only exception at this stage is the USD Index, but that is more to do with the weakness in the Euro than anything else (the CAD and AUD are near multi-week highs). For how long can this behaviour last? We have no idea…….we have no unique insight as to what lies ahead. All we know is that once a primary trend is in place it tends to last for months if not years. We are starting to hear many talk about equities and commodities being in a bubble…….there are still a fair share of dooms-dayers out there……and few who believe that equities will be materially higher by year end. Perhaps there is considerable upside left in equities, commodities and corporate bonds, and downside in treasuries and the USD. Perhaps the hardest thing this year will be to hold onto winning positions. Of course only time will tell.
If you can see things that we are missing please let us know – those who think they know what is going to happen need not apply.
Perhaps we will leave the last to Yogi Berra and his famous “it ain’t over until it’s over”.
