With the S&P 500 cash index closing 2011 down for the year (admittedly down 0.003181% is just 0.003181%, but it is also down), we look across asset classes and notable markets as we reflect on an increasingly intervention-driven and gap-heavy uber correlated global investing framework. UK Gilts, 10Y Treasuries, Gold, and Oil outperformed (rebased to USD terms) while Greek bonds, Copper, Emerging Market stocks, and Asia Ex-Japan stocks underperformed. The Dollar closed almost 1% higher on the year, the EUR down 2.6% versus the USD as the CRB Commodity Index closed -6.67% for the year. Japanese stocks and bonds had a tough year. US investment grade bonds outperformed high yield bonds. There is much to discuss and we open the thread for any and all discussions...
Global markets compared...(click to enlarge)...
An important grouping that many paid attention to is Gold vs TSYs vs Stocks...
Comparing Gold to other commodities...
Global Stock Indices...YTD performance...
While the S&P managed to close marginally down for the year, the sectors' performance was very diverse...
FX markets saw plenty of vol but ended with convergence as the all-powerful USD moved everything - except for the JPY which gained 8.1% YTD (and obviously swissy had the craziest of runs in the year)...
European AAA Sovereign spreads exploded and dispersed as clearly France and Austria are being priced 'differently'...
And evidently the desperate need for USD liquidity is highlighted best with the now ubiquitous EUR-USD basis swap spread...
Of course comparing VIX (actually the 3rd month VIX futures contract here) with implied correlation gives us a sense for the demand for macro protection versus micro protection...its clear that while VIX has dropped recently (as is its tendency at year-end) it is considerably elevated from a year ago and implied correlation is hugely higher signaling a demand for protection remains high as fear is still here.
but maybe security-of-the-year goes to...BTPs - certainly as much a pivot trade as any other in the latter half of the year...
But we end with the clear message that we discussed many times - the market is broken - it broke when S&P downgraded the USA and made the impossible possible...
The explosion of volatility in the financials post the USA downgrade, coupled with the markets absolute schizophrenia (risk-on / risk-off) are very clear when pictured above and below...
The S&P 500 traveled a marvelous 3240 total points close to close while amassing the 0.003181% loss it achieved on the year...