This week, the continuing strength of global equities in the face of several shocks to the world economy became more impressive, or more puzzling, depending on your point of view. Oil prices rose to a level which will be a serious problem for the uspwing, should it persist. (See this earlier blog.) The ECB became the first of the major central banks to tighten monetary policy. Portugal finally accepted the inevitable. And yet global equities continued to rise.
Furthermore, emerging markets significantly outperformed their developed market counterparts, reversing part of their under-performance in the first few weeks of the year. Several investment banks have now tipped the emerging markets as the right place to be if the developed economies slow under the weight of rising oil prices later in the year. But I am far from convinced about this. Read more