The recent reaction to the hopes of a breakthrough in the Greek debt crisis, and an end to the ‘soft patch’ in US growth, did exactly that and sparked off a buying frenzy from investors.
This more positive mood led to global equities having their best week since mid-July 2009, while the core government bond markets had their worst weekly performances in nearly two years. The much overdue relief rally was welcomed by the bulls after so many weeks of negativity. Also the timing of this rally dovetailed very nicely with the end of the second quarter and first six months of the year.
Q3 optimism
However, as we enter the summer months and the third quarter of the year expectations for further good news remain high, for the markets to continue their upward momentum investors will be looking for further positive news, both economically and geopolitically, and a resolve to really address the Greek crisis.
Given all the upheavals over the first half of the year, it would appear that the majority of the western stock markets have weathered the storms better and marginally outperformed those of the emerging markets.
This underperformance has been more prominent in those markets that have been tightening monetary policy to try and counteract the effects of rising inflation.
Without doubt the stock markets of the US have led the way over the first half of the year with the Dow Jones and S&P 500 indices rising, in local currency terms, by 7.23% and 5.01% respectively.
It seems like we are still as dependant on the US recovery as we always have been.
