Sunday, March 28, 2010

A Longer-Term Look at Risk Assets: Is Global Growth Intact?

I thought it might be enlightening to take a longer-term look at three markets. All the above are weekly charts.

We can see that the China ETF (FXI; top chart) retraced approximately half of its bear market decline before pulling back late in 2009 and now failing to register new highs in 2010.

The performance of commodities (DBC; middle chart) has been even weaker, only recovering a small proportion of their dramatic bear market decline. They have failed to better their January highs lately.

The stock markets for Europe, the Far East, and Australasia (EFA; bottom chart) have recovered less than half of their bear market losses. Note that they also have failed to beat their January highs in recent trade.

While the recovery from the bear market lows has been impressive in percentage terms, that in part is a reflection of how low we had gotten. At least thus far, it appears that many risk assets are losing strength of late, not exactly what you'd expect if a global recovery were gaining steam.

1 comment:

richieds said...

Is it fair to use commodities as an example of a failure here, as commodities went on a parabolic run at a time when equities were going in the oppositie direction?
If anything, commodities, especially oil, had a big hand in some of the selling that took place in 2008, including a hyper inflation scare at one point.
I could see it taking many years for commodities to recover while equities enjoy the benefits of that low inflation environment.

Am I wrong here?