The last several quarters have seen three different asset classes move together. The currency, commodity, and interest rate markets seemed to go down together since the summer of 2014 and bottomed over the last two months. The chart below shows the Euro versus the U.S. Dollar, German Bund yields, and oil prices.
The magnitude was different for each, as German yields fell over 90%, the Euro dropped 20%, and oil prices fell 50%, yet the direction down and back up were closely related. Many traders held these cross market positions, however, taking the three together, it was not necessarily diversified.
A lot of worry led many investors to miss out in the 100%+ rise in the Chinese equity markets over the last year. Typically moves of this magnitude in such a short time frame are difficult to sustain, although the aggregate price to earnings ratio is at a benign 8.7X, so fundamentally the value is not rich relative to history.
Despite the average 30-year mortgage rate rising to 4.11% from the start of the year (below chart, teal), the mortgage applications index broke out to a two year high (top graph, orange). In addition, new home sales hit a 5-year cycle high while existing home sales nearly topped the highs from 2013. I recently attended a speech at the CFA Society of Cleveland and the economist mentioned something I have heard over and over. He claimed the millennials will only be city dwellers and eschew the suburbs. My anecdotal observations from the ‘older millennials’ is that home purchases are just delayed compared to prior generations, not put off all together.
We will be back to the semi-regularly scheduled missives next week.
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This material is based on public information as of the specified date, and may be stale thereafter. Aurum Wealth Management Group and/or Aurum Advisory Services has no obligation to provide updated information on the securities or information mentioned herein. Actual events may differ from those assumed and changes to any assumptions may have a material impact on any projections or estimates.