The stock and bond market in the United States is going through a fluctuation period. The global market is also going through some transitions. The following will explain the current period on a global and local level. It will also explain how I believe one should invest in the future.
Currently the U.S. stock market is making gains which are being spurred by positive economic data and also news of future mergers in the works. The American stock market saw a bit of a snag in mid-July when tensions overseas in the Middle East were at a high. However, as things begin to rebound back and we experience continual low interests rates the market is also going in a positive trend. Even with this positive forecasting; Forbes magazine has a little different spin on what is to come in the coming months. In a current article, they site November to April to be the prime time for stock market performance and for buyers. And they sited May to November as the market lows. They site this trend as being something that dates back as early as 1950.
The global stock market seems to be making bounds lately. According to the Wall Street Journal, shares of foreign companies are making up more and more of U.S. investor’s current portfolios. In reference to the Investment Company Institute, more than a quarter of the money in U.S. equity mutual funds is in foreign-stocks. Much of the appeal towards a global portfolio has much to do with the expense of U.S. stocks comparative to those overseas. German stocks are up 2.5%, India’s are up 25%, while Japan is down 5.3% according to the Wall Street Journal. A diverse portfolio working in all these markets; however, would work well in times when the U.S. market is dragging.
Bond markets in the United States have not been going in a positive correlation with the stock markets. Yields are at a low, but not nearly as low as what was experienced in 2012. The uncertainty that is influencing the U.S. Bonds is measured much by implied volatility. The Merrill Lynch MOVE Index is currently hovering towards all-time lows. After the financial crisis, markets have been going through a deep period of deflation which is causing a collapse in volatility. The Fed has begun to use a better interest rate curve model, which has eliminated a great deal of the inflections that have been seen in the past in the interest rate curves. Essentially this means that there is relatively low to none interest rate risks currently associated with bonds. However, according to Forbes, the volatility of the bond market might make an abrupt change. The Fed is moving away from the theory of we will keep rate low no matter the data, to we will rely heavily on the data. The data that they will be taking in is unemployment, economic production, as well as price inflections. As this drives up the rates, it will also drive up the market volatility.
The global bond market is not doing much better. Currently Spanish bonds are dipping lower than 2%. Even with this decrease, Spaniard