About a month ago, we noted that the spread between high yield bonds and treasuries was not confirming the all-time high in the S&P 500. Since that time, we have had a slight turnover in the equity market but an even larger move in junk bonds.
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The median year-to-date performance in the MSCI World Index with two weeks of trading left is -1%. The median stock was up 20% at this point last year and was up 13% at this point in 2012. The developed country with the worst median performance YTD is MSCI Portugal. The median stock is down 35%.
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The MSCI World Index is only about 6% of it’s 200-day high as of the close yesterday. However, 55% of the stocks in the index are down at least 10% and 30% of the stocks in the index are currently in a bear market (down at least 20%).
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While today’s better than expected rise in the flash PMI indicator (black line) for the euro zone is a welcome surprise, it would seem that it will take quite a bit more improvement before we can reasonably expect substantial progress in the recovery of important metrics such as GDP or industrial production: By country, France
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It would be one thing if the recent fall in the price of oil was an isolated event completely explainable by supply side and/or geopolitical factors such as overproduction or the desire of the Western powers to punish Russia for its Ukrainian crusade. That, however, does not seem to be the case.
Read MoreAs of the close yesterday, the US two-year treasury yield was sitting at 61 basis points. For a little perspective, the two-year started the year at 39 basis points and hit a low in September 2011 of 17 basis points.
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Faithful followers will already know that we do not rely on meetings with management or analyst reports in our methodology for finding the world’s best knowledge leaders.
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The spread between 30-year treasury yields and 10-year treasury yields fell to 65 basis points yesterday which is the lowest spread since January 21st, 2009. Since April 2013, the spread has narrowed by 59 basis points. As the long end has flattened, the spread between high yield and AAA bonds has narrowed considerably.
Read MoreTwo weeks ago we mentioned that over the past several years the last six weeks of each year has tended to either strongly favor cyclical stocks or counter-cyclical stocks. Today, we wanted to update that chart.
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After today’s close, using our equal weighting methodology, the MSCI World Energy sector is in a technical bear market (down 20%). In the table below, we can see that as of Friday’s close, the MSCI World energy sector was down 19.07%.
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