Time for the monthly review of the performance of various asset classes. Emerging market stocks have had a fantastic YTD, chalking nearly 70% return, some of that attributable to the USD carry trade, but also due to the immediate stimulus programs enacted by many emerging markets' governments. When you realise that most of these countries did not have as massive a wealth destruction effect as say in the US and much of Europe, one can understand the liquidity awashed in emerging market.
The other important sector which I have highlighted last month was that the commodities have started to move, which is also why the CPO saw some good upwards action last month. I suspect that its not pertaining to the fundamentals of commodities per se but rather some of the switching by USD carry trade into commodities.
If you look at the US equity markets, though many seemed fearful as it climbs towards 11,000 on the Dow, they are just up broadly by 25% on a YTD basis.
Surprisingly, junk bonds are also posting unusually large returns, or what we call high yield bonds. That can be explained by the deluge of funds moving out of cash markets and TIPs seeking higher returns one the risk aversion mentality subsided, causing a sudden ramp up in demand for junk bonds. However, the return last month for junk bonds has been muted as many are more circumspect now that the Dow has breached the 10,000 level.
p/s photos: Jessica C. (Wacoal's top model)
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