As we suspected, emerging equities bounced nicely last week with Brazil and Hong Kong leading the major indices, both up over 3 percent. Developed equity markets continued to move higher with France now up close to 10 percent for the year. The FTSE is the laggard of the majors as the country’s monetary authority debates raising interest rates.
The Russell 2000 led the U.S. equity indices higher, increasing 1.55 percent for the week. The Russell is widely used by traders to get short the market or as a hedging instrument. The Dow moved higher and is now up over 7 percent for the year.
Treasuries were relatively flat and the U.S. dollar index closed down a little over 1 percent for the week. Gold was up 2.27 percent and we believe the December 7th $1,430 all-time high will be taken out in the next few weeks. Crude oil was relatively flat. The foods traded off and may have seen their short-term high. Wheat was off over 6 percent.
We’re expecting a pause in the powerful equity rally and think geopolitics could get a little ugly here. Gold, oil, and the dollar should do well, in our opinion.
Ireland holds elections on Friday and the center-right opposition party, Fine Gael, is set to be the next ruling party. Though the leaders of the party have said there will be no default, a recent poll showed that 84 percent of the population backed renegotiating terms with bondholders.
We’re monitoring the action in Apple as the downdraft over the past few days has us a little concerned. The stock was down over 2 percent on Friday in an up market on relatively high volume, 75 percent above the 20-day average. (click here if charts are not observable)