FXstreet.com (Barcelona) - The strong rally in equity markets has come without significant upgrades to the market’s growth views. In the US, global cyclical stocks are close to their 2009 lows on a relative basis (as are government bond yields), although the overall market is at cycle highs, and defensive stocks are a long way above their pre-crisis peaks.
This divergence between the relative performance of cyclical assets and the overall equity market has accelerated since mid-2011. In terms of the Euro area crisis, According to the Economics Research Team at Goldman Sachs, “We saw a similar divergence between the equity indices and cyclicals around the 1997-98 Asian crisis. The hit to growth and markets was focused on the crisis countries, whereas many DMs benefited from the related easing in financial conditions, driving indices higher even as global cyclicals underperformed. So a template of a ‘regional’ Euro crisis may be helpful.”
This divergence between the relative performance of cyclical assets and the overall equity market has accelerated since mid-2011. In terms of the Euro area crisis, According to the Economics Research Team at Goldman Sachs, “We saw a similar divergence between the equity indices and cyclicals around the 1997-98 Asian crisis. The hit to growth and markets was focused on the crisis countries, whereas many DMs benefited from the related easing in financial conditions, driving indices higher even as global cyclicals underperformed. So a template of a ‘regional’ Euro crisis may be helpful.”
