The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
) -- In the first two months of the year,
SPDR Dow Jones Industrials
garnered 6.5% and the underlying benchmark made a successful run at 13000. It was a phenomenally fast start that persuaded many investors with cash on the sidelines to reconsider.
Perhaps surprisingly, foreign stock ETFs dramatically outperformed domestic counterparts in January and February. For example,
Vanguard Emerging Markets
raked in 16.8%,
Market Vectors Brazil Small Cap
rocketed 27.9% and
Wisdom Tree India Earnings
catapulted 31%. In essence, the "risk trade" was striking Madonna's vogue pose.
However, things changed in the month of March and the mainstream media seemed to miss it. Even as the
topped 1400 - and even as the
surpassed 3000 -- significant risk assets were starting to slide.
Specifically, energy and materials stocks dipped; small-cap U.S. stocks waned. And most notably of all, emerging market equities everywhere responded poorly to weak demand from China.
Personally, I don't view potential contraction in China's manufacturing sector or uncertainty over a so-called property bubble as alarming. On the contrary. I believe Chinese authorities will exert their fiscal firepower in the form of a direct stimulus package and People's Bank leaders will lower interest rates and cash reserve requirements as needed. Ultimately, that will benefit investors in certain aspects of the emerging market space.
However, I am troubled by economic contraction in Europe as well as the burdensome rise in Spanish bond yields. With eurozone PMI declining to 48.7 in March, and
European banks demonstrating fear in lending to one another
yet again, the media might want to lay off the U.S. economic recovery angle a tad.
In truth, trillions in deficit spending combined with electronic money printing and unbelievably low interest rates have made U.S. stocks attractive. That said, a "straight line through the roof" is not a probable investing outcome with 3-month LIBOR rates hampering any chance at a European renaissance. (Note: The rapid decline in 3-month LIBOR that began in 2012 helped fuel risk assets through February, but the rate is stuck at 0.47 since March began.)