Equity markets’ zombie dance
Just when you thought equity markets were looking shaky, they’ve taken us by surprise and popped back to life like some sort of zombie back from the dead.
Around the world, the US, Asian and Australian markets performed well last week making up for most of the losses of the past month. European markets even came back a bit although it was more a stabilisation than a recovery as the issues in Ukraine continued to weigh heavily on the region.
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Wealth Know How is the online network helping people manage their wealth through financial education. Whether you are looking for simple ways to better manage your cash, or you are after a complete strategy on how to save for retirement, we can help you understand your options. It is important to have a vision for your future, but its knowledge not dreams that will ultimately deliver financial success.
Published on 19 Aug 14
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Just when you thought equity markets were looking shaky, they’ve taken us by surprise and popped back to life like some sort of zombie back from the dead.
Around the world, the US, Asian and Australian markets performed well last week making up for most of the losses of the past month. European markets even came back a bit although it was more a stabilisation than a recovery as the issues in Ukraine continued to weigh heavily on the region.Sponsor - Wealth Know How
Wealth Know How is the online network helping people manage their wealth through financial education. Whether you are looking for simple ways to better manage your cash, or you are after a complete strategy on how to save for retirement, we can help you understand your options. It is important to have a vision for your future, but its knowledge not dreams that will ultimately deliver financial success.
-
Venezuela tension heats up
Duration 03:16
-
Aussie dollar surprises market
Duration 03:10
-
Markets climb as investors watch US healthcare bill
Duration 02:31
Around the world, the US, Asian and Australian markets performed well last week, making up for much of their losses. European markets even bounced a bit, although it was more of a stabilisation than a recovery, as the issues in Ukraine continued to weigh heavily on Europe.
The rebound is surprising given the backdrop of the recent weaker-than-expected macro-economic numbers and continuing geopolitical risk.
The main reason we believe there is still life in the equity markets is that earnings have been good.
There has been a lot of good news around earnings in Europe. The earnings picture however has been clouded by concerns about the worsening relationship between Europe and Russia. CEOs are hesitating to execute their business strategies until the situation stabilises.
Earnings have been above expectations in Japan with 33% of companies beating earnings growth by more than 10%.
S&P500 companies are on target for earnings growth of around 9%. Small caps, which are more geared to the US economy than the big corporates, are delivering 16% earnings growth on the back of an improving US economy.
Here in Australia earnings season, which has just started, is yet to disappoint.
If equity markets have risen from the dead like a zombie, then it’s fair to say that the long bond market is possessed.
German Bunds yields fell below 1% for the first time ever. If they don’t move back above 1% fears will be sparked that Europe is heading for a Japan-style deflationary environment.
The fall in German bunds, as well as recently lower-than-expected US macro-economic numbers, helped drive US bonds yields lower to below 2.40%.
There is some talk of a ‘flight to safety’. This theory doesn’t really hold up given oil prices are falling and gold is remaining stable. It suggests that bonds yields are falling on other issues.
We are also seeing fund managers move out of Europe and into Asia, assisting the strong performance of Asian markets recently and also supporting the Australian market.