What Happened in 1H2013
Monday, 1 July 2013
Below I list 7 charts to remember as some of the key stories and developments in global financial markets in the first half of 2013. It’s not exhaustive; you could of course find many more.
US equities continued the bull market started in 2009. Most of the major indices in and outside the US exceeded their all-time highs. The 1H2013 rally was impressive and that has not changed even by the June correction. Regardless of your opinion on the future direction, 1H2013 was a great time to be long stocks.
In line with the smooth and clean up move in equities, the VIX spent most of 1H2013 near multi-year record low levels. There were only 3 notable spikes, with only the last one taking the VIX above 20. Going into the second half, the VIX is quite high compared to its first half values, but still quite low compared to the previous years. It is roughly in line with actual volatility realized in June, but very high compared to volatility realized in most of 1H2013.
US treasury yields had been rising into the end of 2012, but lacked any more remarkable development in the first quarter. They dropped in April, but failed to get below 2012 lows. In May and June bonds were selling off and that selloff was naturally not limited to US treasuries only. US 10Y yield rose a full percentage point in two months.
At the end of 2012, _the_ trade in big global macro was Japan. It continued to be so in 1H2013, with additional flavour added by ambitious Japanese policy-makers. The yen weakened to above 100/USD for the first time since April 2009. Nikkei rallied exponentially and its volatility doubled. At start of 2H2013, Japan continues to be the wildest of the “developed” markets.
Emerging markets were one of the big losers among major asset classes in 1H2013. As you can see on the chart of EEM (MSCI Emerging Markets ETF) below, being long emerging markets returned close to nothing in the last 3-4 years (yes I know EEM pays some dividends, but still). Too many political and economic challenges have recently appeared in major emerging countries from China to Brazil to Russia to Turkey. Of course this might also be a great time to buy (I don’t know).
Another obvious loser was gold. Its rally, called bubble by many people, had started to look less shiny at the end of 2011 already, but in 1H2013 the price action in gold changed from sideways to collapse. Of course, gold has not been the only weak commodity in the recent months.
Apple is not a “macro” market, but as the bluest of the blue chips, adored and hated by many people (and media), it had become a sort of asset class of its own and worth to keep an eye on whatever you trade. There are parallels to the gold story. The stock has now wiped out all its wild 1Q2012 gains. I don’t analyse, predict, or trade it, just watch.