While the capital markets have been equity-centric since the beginning of the stock market rally in early February, we are beginning to experience some seismic shifts of capital allocations.
- Equities: Transportation and small-cap stocks were the week’s top performers, while interest rate sensitive Utilities significantly underperformed the market. With the exception of the Nasdaq-100, large-cap stocks were relatively unchanged. Volatility, as indicated by the VIX, remains subdued.
- Bond Rates: The FOMC interest rate policy meeting is scheduled for this Wednesday, April-27th, and although no changes are expected, attention will be focused on whether its future bias is dovish or hawkish. Meanwhile, both 10 and 30 year treasury rates moved up considerably this week.
- Currencies: The US Dollar has started to firm against the Euro and Yen, while commodity correlated currencies such as the Aussie and the Canadian dollar have delivered respectable returns year-to-date.
- Commodities / Energy: Despite failure of the Doha meeting to produce an agreement to freeze production, oil and gas prices continued to surge. Hat tip to the oil production strikers in Kuwaiti. Natural Gas must have gotten the invitation to this one, because it also joined the party.
- Commodities / Metals: Gold is consolidating and Silver has broken out to new highs and initiated a new intermediate uptrend. Yet, Copper has been capturing my attention lately. Could that basest and most prescient of all metals be telling us that a resurgence in economic growth is within view?
- Commodities / Softs: Cotton distinguished itself as it closed above its 50-week average. Exhibiting just the opposite was Orange Juice, which crossed below both its 50 and 200 week moving averages with a bearish trading pattern.
- Commodities / Grains: No comments. We shall initiate coverage on this group next week.
- Real Estate: The Dow Jones Real Estate Index made a new 4-week low, but appears to be consolidating as its uptrend remains intact. The US Home Construction Index may also be starting a consolidation phase and testing support at its 50-week moving average.