Equities: Bad economic data continues to hit the market, this time durable good orders fell & unemployment claims rose. Markets fell on this but later recovered some ground, still finishing lower overall. The economic data continues to be quite mixed, and this is making investors jittery about any recovery. It seems quite clear we won't get the V shaped recovery we were hoping for. I was watching Bloomberg this afternoon, and they were interviewing some equity analyst who was touting buying defensive stocks during these market falls. Even if the beta is less than one, we still lose money in a falling market, however defensive the stock. It amazes me that we are always only advised to buy stocks regardless if the market is rising or falling. I have yet to hear a single pundit recommending shorting this market, which I might add is not such a bad idea.
Currencies: Rating agencies threatening to downgrade Greece's debt did the Euro no favors, however it did rebound against the Dollar late in the day. The Pound continues to get hammered, today it was UK quarterly investment falling that did it. I don't see any near term relief for the Pound, however the Euro could get a boost if there's further moves towards a Greek bailout. The Yen is also coming out as a big winner in the safe haven buying. If we see further bad US data coming out, the Yen could appreciate against the Dollar in the medium term. It will also benefit if there is further unwinding of carry trades.
Commodities: Oil had a big fall today coming mainly from weakness in equity markets and concern that the faltering recovering will dent demand for the commodity. At the moment, we are seeing a strong correlation between equity markets and oil. Its anyone's guess whether this is likely to continue, but barring any fundamental supply issues, the price of oil should be closely tied to overall sentiment for the economy, which puts its primary risk towards the downside. Gold was flat today, a result of two opposing forces, one being weakness in equity markets, the other the safe haven appeal.
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interesting stuff.... I was thinking of a W-shaped recovery or maybe a U-shape or perhaps an S-shape or imagine an X-shaped, even worse an A-shaped recovery.....in the end we just want to recover regardless of the shape....something to ponder over Armchair trader!
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