Saturday, 24 January 2015

Thoughts on yet another interesting week on the world's financial markets

Another...interesting week on the world's financial markets.  I gave my initial thoughts on the introduction of QE in the Eurozone (see here). Looking more generally over the last week apparently in equities it was difficult to lose money: 

Of course it was a lot more complex than that many major bond markets are ultra-strong too as shown by this fabulous chart via @MktOutperform...

...and the rise of the negative yield:

So everything is wonderful then?  Well, spot the difference between the DJIA...

...and the German DAX (over the same period):

Kind of interesting...  Of course the wise amongst you will have noted the obvious flaw in the above analysis which mentions nothing about currencies.  The DXY (US dollar trade weighted) is at a decade plus high and the euro...isn't.  

Now if you re-run the German index in US dollar terms it looks rather different.  Kind of interesting

Now what should this remind you of?  The only time the Japanese market goes up recently is when the yen falls.

A final thought.  I have observed in recent weeks the slowing earnings momentum in the US market as the dollar's rise starts to bite.  Did you see the US manufacturing PMI on Friday?

It is becoming clearer and clearer to me that volatility induced by imbalance and distortions in international capital markets is the reality of 2015.  Keep on watching the VIX for your overlay trading opportunities:

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