July 02, 2010

2010 Half-time Report

What started out as a promising year for equity returns, could transform into a mirage after all. The major markets turned south ever since the beginning of May.  So far, the old “Sell in May” rule looks like very good advice given the more than 14% decline of the S&P 500 since the beginning of May.

The S&P 500 is in good company though.  All major stock markets, with the exception of India which was essentially flat (+0.81%), showed a decline for the first six months in 2010.  The next best in a crowded field of losers was Germany’s Dax which declined only 1.37% so far this year.  All others, China leading the crowd, showed poor results at half-time in 2010.


Taking a closer look at the individual markets, we noticed that most of them have been trading below the 200-day moving averages (red line graph in charts below; the traditional bear market signal occurs when the prices fall below the 200 day moving average).  Notable exceptions, albeit potential late-runners: India and Germany.

S&P 500 (USA)   Dow (USA)
SPX-2010-1   Dow-2010-1
FTSE (UK)   DAX (Germany)
FTSE-2010-1   Dax-2010-1
All Ordinaries (Australia)   Nikkei (Japan)
Australia-2010-1   Nikkei-2010-1
Hang Seng (Hong Kong)   SSEC (China)
HSI-2010-1   China-2010-1
BSE (India)   Bovespa (Brazil)
BSE-2010-1   Brazil-2010-1


On the currency and commodities front, things have not been all that rosy either.  Despite questionable economic prospects, the US Dollar has again become the de-facto safe haven currency.  Other strong performers were Gold & Silver as well as the Japanese Yen.  The worst performer of the major currencies has been the Euro which fell over 15% during the first half of this year.


Add the recent drop in US-Treasury yields and I can see memories of 2008 are resurfacing...

10-year US T-Note   30-year US T-Bond
10_Year-2010-1   30_Year-2010-1

In view of the less than encouraging US employment report that just came in, we are entering murky waters for the remainder of the year.

Good luck and good investing!

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