Monday, April 05, 2010

Another Look at the Global Growth Theme

We are seeing upside breakouts across markets, suggesting that the growth theme is truly global.

Note that emerging market stocks (EEM, top chart), which had been lagging, have broken to the upside with a vengeance. Today we saw that strength carry over to another recent laggard, small cap stocks in the U.S. (IWM, second chart from the top).

Amidst indications of global growth, we're seeing considerable strength in oil prices (USO, second chart from bottom). We're also seeing the long end of the yield curve price in a bit of inflationary expectation, with 10-year rates breaking to the upside ($TNX, bottom chart).

Until we have more concrete evidence of central bank tightening in the face of such growth--and that might have to wait for inflation to push unemployment off the front pages--I would expect markets to continue to respond to the low interest rate/low inflation/improving growth environment.