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Prieur Perspective: Markets Trapped on Roller-Coaster


Recession got no vacation over holiday weekend.

The holiday-shortened week saw investors pondering the depth of the economic rabbit hole as the curtain closed on the second quarter. As investors vacillated, most financial markets were characterized by a roller-coaster ride. Friday's worse-than-expected US jobs data left no doubt that the economy was in recession.

Given the economic malaise, it's safe to say that there have probably been better Fourth of July celebrations than this weekend's.

The past week's performance of the major asset classes is summarized by the chart below -- a set of numbers indicating that a degree of risk aversion has crept back into financial markets.

Looking at the quarterly performance of the same asset classes, the picture is quite different from the chart above, with risky assets putting in a phenomenal performance to the detriment of the traditional safe havens such as the US dollar and government bonds.

A summary of the movements of major stock markets for the past week, as well as various other measurement periods, is given below. The weekly gains/losses camouflage the fact that many indices experienced a rather bumpy ride during the course of the week.

Stock market returns for the week ranged from top performers Egypt (+8.9%), Uganda (+7.9%), Bangladesh (+6.3%), Pakistan (+6.1%), and China (+5.5%) to Slovakia (-9.3%), Croatia (-8.7%), Vietnam (-5.6%), Mauritius (-4.0%), and Hungary (-3.6%) at the other end of the scale. Emerging markets make up all 10 of the best-performing stock indices so far in 2009, led by Peru, Sri Lanka, and China. (Click here to access a complete list of global stock market movements, as supplied by Emerginvest.)

John Nyaradi (Wall Street Sector Selector) reports that as far as exchange-traded funds (ETFs) are concerned, the winners for the week included iShares MSCI Turkey Index (TUR) (+5.4%), iShares MSCI South Africa Index (EZA) (+4.5%), and PowerShares Private Equity Portfolio (PSP) (+4.4%). On the other side of the performance spectrum, laggards were centered in the broader commodity category, including US Natural Gas (UNG) (-6.8%), iShares Silver Trust (DLV) (-3.9%), and PowerShares DB Commodity (DBC) ( 3.7%).

The quote du jour this week comes from Bill King, writer of The King Report, and is related to Wall Street pay approaching 2007's record levels, as reported by the Wall Street Journal. Bill King remarked:

"Will Ben, Hank, Little Timmy, and Congressional leaders explain to the American people how it is possible for Wall Street to have near-record remuneration AFTER the US taxpayers were put on the hook for about $12 trillion of guarantees to The Street? And will they explain to Americans that while Street insiders 'earn' record pay they must suffer a severe recession or depression, possibly record future inflation, collapsing home values, job losses and an income contraction?"
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No positions in stocks mentioned.
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