Stocks continued their run this week as investors once again embraced risk after the announcement of a preliminary European debt deal. Since September 22, the SPDR S&P 500 ETF (SPY) is up 14% while the Barclays Capital 20+ Year Treasury Bond Fund (TLT) is down 10% over the same time period.
Category: Chart of the Week
In a wild 4 week period, stocks and US Treasury bonds have experienced double digit swings that resulted in the two asset classes ending about where they began.
Technology stocks have held up better than average in the highly volatile equity markets of the past few weeks. In the three months ended October 7, the Dow Jones U.S. Technology Sector Index Fund (IYW) is down 8%.
Uncertainty in Europe and China and a growing threat of a double-dip recession in the US has resulted in a rapid decline in the price of base metals.
As investors abandon stocks and precious metals, the US dollar has rallied. The PowerShares DB US Dollar Bullish Fund (UUP) is up over 3% in the past 3 months compared to a 11% decline in equities over the same time period.
Investors looking for an alternative to the volatile equity markets may want to consider corporate bonds. The PIMCO Investment Grade Corporate Bond Index Fund (CORP) is up nearly 3% in the past 3 months while equities have declined nearly 4% over the same time period.
Investors are pulling money out of European stocks and the French equity market has been particularly hard hit. In the past 3 months, the MSCI France Index Fund (EWQ) is down 28% compared to a 10% decline for the S&P 500 Index (SPY) over the same period.
While stocks have been flat with increasing volatility, a strong performer over the past couple of quarters has been a bet against the US dollar. With uncertainty in Europe holding back the Euro, a better declining dollar play has been the Swiss Franc.
Last week’s swoon in the equity markets was accompanied by another strong performance by gold. The last peak for stocks was on July 7 when the S&P 500 ETF (SPY) closed above $135. Since then, stocks are down over 11%.