Stocks, Bonds, And Gold All At Highs
Stock markets across all developed economies are at highs, many of them at all-time highs, as monetary stimulus programs show signs of working.
By Vikram Rangala
Thursday, February 26, 2015
For the moment, the strong US economy is providing enough of a lead that other developed and emerging economy markets are rising. The main factor that allows for this is the expansion of liquidity as stimulus programs in Europe and Japan expand and India reports inflation below its central bank’s target maximum of eight percent. The MSCI All-Country World Index climbed to 434.4 on Wednesday, up 11 days straight, while the gauge of developed country equities is approaching a record high.
Japan and Europe breaking records
Japan's Nikkei 225 closed Thursday at its highest point since 2000. The Bank of Japan has enacted a record stimulus in an effort to fight the price deflation that has stifled Japan's economy for over a decade. The latest be of stimulus buying has encouraged investors to stay with Japanese firms.
The DAX hit a new high as Germany reported a 0.1 percent drop in unemployment and an increase in consumer confidence. A survey released today showed German consumer optimism at its highest level in 13 years, something not seen since the dot-com boom. Falling energy prices, low interest rates, and reduced worry about Ukraine and Greece have all been cited by analysts as factors.
The FTSE 100 also broke a 15 year-old record from the dot-com era, topping an intraday high set back on December 30, 1999. The Telegraph’s Ben Martin points out that today’s FTSE is different from that of the tech bubble days. Fully one-fifth of the index is weighted towards mining, gas, and other commodity companies which were hurt by oil and metal price shocks. This is one reason the FTSE has underperformed other world indices. But as oil stabilizes and both gold and copper rise, the FTSE is breaking records.
The Stoxx 600 index went to a seven-year high this morning as European Central Bank President Mario Draghi made official his 1.1 trillion euro ($1.3 trillion) stimulus plan, which has begun buying assets, particularly bonds.
US Stocks pull back slightly
US stocks pulled back slightly from the latest record highs set earlier this week, despite weak inflation and jobs numbers. While some people are saying the market is too high, overbought, due for a correction, etc., there are always some pessimists available for comment when the stock market makes new highs. Whichever side proves to be right, one thing is for sure. Some people will be able to say, "See? I told you so."
Flight to everything
As if a global stock rally weren't enough, bonds are also up and so is gold. German notes are below zero for the first time at -0.01%. Nine Eurozone nations saw record low yields today. Gold continues its rally with new buying from China after the Lunar New Year holiday. Other metals like copper, platinum, and palladium are following suit.
Instead of a flight to quality, today seems like a flight to everything. In times like this, it can be hard to choose where to put your money. However, if we continue to see extremely low volumes in stocks, the volumes in the other markets may give some insight into where the money is going. Always follow the money.
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