Much digital ink has been spilled since the onset of the financial crisis discussing the fact that global markets (and individual stocks) had all been trading in what seemed like lockstep. Depending on whether risk was ‘on’ or ‘off’ markets seemed to be moving to the beat of a single drummer. That effect now seems to have eased. Stocks and sectors have now eased off of their high correlations. The US stock market has seemingly disengaged from the action in the US dollar. In short, it seems like investors have moved past the trauma of the financial crisis and are now focusing on more micro effects. However some analysts believe we are still in a macro-dominated investment environment. In today’s screencast we look at the implications of an easing in the correlation trade.
Items mentioned in the above screencast:
The correlation trade has broken down. (WSJ)
Fund managers are slowly getting over the trauma of the past few years. (Big Picture)
Francois Trahan talks macro market effects with Consuela Mack. (Wealthtrack)
“Eventually markets will return to something approaching a new normal…At that point a new set of skills will be required of today’s macro-themed investors. ” (Abnormal Returns)