Most of the week’s focus was on Egypt and managing risk around China’s tightening cycle as Asia returned from the holiday. Developed equities continued their relentless rally with the Russell 2000 increasing 2.75 per cent. The Hang Seng and KOSPI got crushed falling over 4 per cent. We’re watching the 2,600 level on the Hang Seng as continued weakness and a break there could signal the correction in developed equity markets that everyone is waiting for.
The flows remain bullish on U.S. and developed equities and we expect to see a little bounce in emerging equities in short term. Bespoke points out that the S&P500 needs a 1.79 per cent gain to hit the 100 per cent increase mark from the March 9, 2009 low and just a 17.76 per cent increase to make it back to the all-time high. You think we can make the 17.76 number by July 4th? Don’t hold your breath but wouldn’t that be patriotic? (click here if charts are not observable)