“I want to know healing An American prayer I want to know the meaning Of American prayer I want to believe in American prayer But I can hear children screaming American prayer”
Is Money Moving Again to More Expensive Markets?
It looks like investors are buying expensive markets and selling cheap markets again. In my August post “Gimme Shelter,” I pointed out that money was flowing into an expensive fixed income market and out of a reasonably priced equity market. At the time, I observed that recency bias and negativity bias were leading investors to shift money “under the mattress” into traditionally safe bonds or cash. I cited a Wall Street Journal article reporting that investor demand for bond funds relative to stocks was at the highest level on record. According to the article, investors had poured $202 billion into global bond funds and withdrawn $57 billion from stocks. In just the U.S., China and Japan alone, a stunning $55 trillion was sitting idle in bank deposit accounts that were yielding essentially zero interest. “Never before in history have individual investors been so bearish on stocks when the stock market is at a record high,” I wrote.
Since my August 2016 “Gimme Shelter” article The S&P +6.38% vs. AGG (bond index) -3.69%
1. 9-year low in emerging market high yield credit spreads.
Yield Spread and Risk Typically, the higher risk a bond or asset class carries, the higher its yield spread. When an investment is viewed as low-risk, investors do not require a large yield for tying up their cash. However, if an investment is viewed as higher risk, investors demand adequate compensation through a higher yield spread in exchange for taking on the risk of their principal declining. For example, a bond issued by a large, financially healthy company typically trades at a relatively low spread in relation to U.S. Treasuries. In contrast, a bond issued by a smaller company with weaker financial strength typically trades at a higher spread relative to Treasuries. For this reason, bonds in emerging markets and developed markets, as well as similar securities with different maturities, typically trade at significantly different yields. Read more: Yield Spread Definition | Investopedia http://www.investopedia.com/terms/y/yieldspread.asp#ixzz4YeksCSSR
Emerging Markets Took Lead Over U.S. as Dollar Weakened.
Emerging Markets Ex-China
EGAI Emerging Markets ex-China Index – ETF Tracker
The index measures the stock performance of up to 700 emerging market companies, excluding companies domiciled in China and Hong Kong. Companies are selected and weighted according to free-float market capitalization.
For some perspective on a key US stock market index, today’s chart illustrates the overall trend of the tech-laden Nasdaq Composite since 2000. As today’s chart illustrates, the Nasdaq’s seven-year post-financial crisis rally is still very much intact. While other major indices have pulled back slightly (though still trade near historic highs — the Dow just closed above 20,000 and the S&P 500 is closing in on 2,300) the Nasdaq continues to post all-time record highs and, today, did so once again.
1.CME Group Daily Volume +25%….Energy Trading +27% and Metals Trading +49%
CME Group Driving Global Growth and Commerce
CME Group is the world’s leading and most diverse derivatives marketplace, handling 3 billion contracts worth approximately $1 quadrillion annually (on average). The company provides a marketplace for buyers and sellers, bringing together individuals, companies and institutions that need to manage risk or that want to profit by accepting risk. Our exchanges – CME, CBOT, NYMEX and COMEX – offer the widest range of global benchmark products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals, weather and real estate. As part of our commitment to providing innovative risk-management solutions to the marketplace, CME Group also offers a growing slate of cleared OTC products and services. Through our CME Globex electronic trading platform, users worldwide are able to access the broadest array of the most liquid financial derivatives markets available anywhere. Additionally, CME Group operates CME Clearing, one of the world’s leading central counterparty clearing providers. By serving as the counterparty to every trade that happens in our markets, we protect the integrity of our markets, virtually eliminating third-party credit risk. For the global economy, this unparalleled access translates into opportunity. http://www.cmegroup.com/company/history/
CME Group Breaks Out of a Long Sideways Channel.
CME 20% Move After Election…Trump Inflationary Policies Positive for Commodities Trading?