The intense momentum or positive inertia on the financial markets
today has catapulted world equity indices
to new all-time highs, particularly highlighting the monthly performance both by countries in Europe, driven by the election results in France and those more closely tied to the emerging economies.
Nevertheless the strong divergence in past index performances depending on geographic region is very much worthy of mention
. The EuroStoxx, for example, is still 35% below the all-time highs it reported in February 2000, despite the forceful increases of recent months, whilst the S&P 500 stands 55% above those same levels. From our point of view, this underlines the structural difference in economic growth between these two geographical areas.
… with the rest of the financial markets stable
The monthly trend on the rest of the financial markets has remained stable
, although we should remark on the slightly negative trend the dollar reported against FX from the rest of the world.
Proof of said stability is the level reached by the volatility indices
, which lie at the lows seen in 2006 and 2007, just before the outbreak of the financial crisis.
Uncertainty returns in Brazil…
Despite this apparent balance, we should point out the strong falls r
eported by shares and securities from Brazil, which have been affected by further cases of corruption among its political leaders, showing how sensitive investors are towards such situations.
… and figures from China are starting to disappoint
Another concerning figure is the fall reported by monetary liquidity indicators
in the Chinese economy, which could lead to further outflows of capital from this country, placing both its financial assets and its real economy under pressure, although the short-term environment appears favourable for the Asian giant.
We retain our view
We retain our view of previous months: Positive in risk assets (stock markets and corporate debt) in the short term, although we are aware of the high levels their valuations are reaching and the low yield they are delivering in the medium and long term.
Alternatively, in the short term we remain cautious regarding US sovereign bonds
. We think that its economic strength and the possible stimulus measures from the government may imply further rate hikes for long-term bonds, and subsequently price falls in these assets.
Nevertheless, we remain positive in the medium and long term
, buying US sovereign bonds whenever a market opportunity arises to do so.