Late again, sorry!
The world is moving fast, but markets appear to have slowed moderately: the S&P 500 lost 0.6% last week, whilst the Eurostoxx 50 gained 0.3% and Russia lost 4.0% (having rallied aggressively for the previous two weeks).
In fact, Russia’s performance was impressive, considering another 6.8% drop in oil prices. Not only did the equity market outperform oil, but more significantly the ruble did too. What happens next?
Of course Europe remains front and centre, with Spain now having formerly requested banking support, and now Cyprus completing the expected step of requesting help. As Uruguay automatically needed help when Argentina defaulted in 2001, so Cyprus is unable to sufficiently insulate itself from Greece.
This week we have a European summit which, dare I say it, might bring clarity needed to stabilise the European market in the short-term. The topics on the table: banking union, unified fiscal constraints and ultimately political union, reflect the full array of issues that the market ultimately needs resolved. Clear commitments on these points would ultimately allow Germany and the IMF to engage more proactively in resolving the fiscal crunches underway. This would not solve the growth problems, but it would be a clear step forward, perhaps allowing other markets to follow their fundamentals.
One great buy then would be Russia. The recent changes in the oil price have brought the curve back into contango (futures prices are higher than spot prices), highlighting a sense that traders may now believe the commodity is oversold. This dynamic likely explains the slowdown in the ruble’s descent, and justifies increased investment allocation, at least in this investor’s view.
We are not yet clear of the risks, even if the European summit ends well, the US is facing an economic cool off that is an increasing concern. But, the emerging markets are better positioned to stimulate and have begun doing that. Once again they can be expected to contribute the bulk of the economic demand that will bring stability. We are at your disposal for any investment questions you may have.
Best regards,
James
The world is moving fast, but markets appear to have slowed moderately: the S&P 500 lost 0.6% last week, whilst the Eurostoxx 50 gained 0.3% and Russia lost 4.0% (having rallied aggressively for the previous two weeks).
In fact, Russia’s performance was impressive, considering another 6.8% drop in oil prices. Not only did the equity market outperform oil, but more significantly the ruble did too. What happens next?
Of course Europe remains front and centre, with Spain now having formerly requested banking support, and now Cyprus completing the expected step of requesting help. As Uruguay automatically needed help when Argentina defaulted in 2001, so Cyprus is unable to sufficiently insulate itself from Greece.
This week we have a European summit which, dare I say it, might bring clarity needed to stabilise the European market in the short-term. The topics on the table: banking union, unified fiscal constraints and ultimately political union, reflect the full array of issues that the market ultimately needs resolved. Clear commitments on these points would ultimately allow Germany and the IMF to engage more proactively in resolving the fiscal crunches underway. This would not solve the growth problems, but it would be a clear step forward, perhaps allowing other markets to follow their fundamentals.
One great buy then would be Russia. The recent changes in the oil price have brought the curve back into contango (futures prices are higher than spot prices), highlighting a sense that traders may now believe the commodity is oversold. This dynamic likely explains the slowdown in the ruble’s descent, and justifies increased investment allocation, at least in this investor’s view.
We are not yet clear of the risks, even if the European summit ends well, the US is facing an economic cool off that is an increasing concern. But, the emerging markets are better positioned to stimulate and have begun doing that. Once again they can be expected to contribute the bulk of the economic demand that will bring stability. We are at your disposal for any investment questions you may have.
Best regards,
James
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