Investment

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Jim O'Neill 04 January 2013 13:05 gs-jims-views Is 2013 Going to be the Great Year of Rotation from Bonds to Equities?

Is 2013 Going To Be The Great Year Of Rotation From Bonds To Equities?

A Happy New Year to one and all, and fingers crossed for an exciting and rewarding one. As has become the norm for me recently, I will await the first cumulative five days of the S&P 500 equity market trading to firm up my degree of confidence about things, which will be next Tuesday 8th January. Recall the great Almanac rule that, as others show, if the US market is net positive after the first five days of trading, with something like an 85% success rate since 1950, the market is not only up for the year, but it is around 14% gain on average. Ahead of this, five quite encouraging signs: First, the ongoing US fiscal cliff development has been laid to rest for now, well, at least for two months! Second, a number of key data points in the US and elsewhere have positively surprised during and since the holiday. Third, the domestically generated stories in both China and Japan kept their equity markets doing rather well over the holiday period, suggesting some positive carry-over for the rest of the world as well, of course, being good news for those of us investing in these countries. Fourth, there are further signs of the intensity of cross-market correlations breaking down since the post-2008 environment (witness the EUR/USD decline despite stronger stocks, for example) and fifth, there is some noise at least, and certainly investor enquiry, about a rotation from bonds into equities – at last, some might say! And to top it off, United are seven points clear coming into the New Year! All none too shabby, I’d say.

The US Fiscal Cliff Topic.

So, the whole topic turned out pretty similar to how I had thought. Now everyone is already wondering, worrying and debating what is going to happen with the same issues at the end of February, with...