Wednesday, March 24, 2010
A downgrade of Portugal’s credit rating broke the Euro sharply lower overnight, putting pressure on higher yielding stock equities, gold and crude oil. Shortly before the
opening, these three major asset classes are trading lower but have not reacted nearly as much as one would have assumed following the news that the fiscal crisis is spreading throughout Europe. This
news may have already been priced into the market, but with the June Dollar Index making a new high as demand picks up for lower yielding assets, one has to be less aggressive at current levels in
the stock market because of the possibility of a risk aversion led sell-off.
June Treasury Bonds are trading sharply lower after several days of consolidation. While the media likes to talk about the stock market as a leading economic indicator, I
have always maintained that Bond traders are the smartest investors in the world, and the overnight developments in the bonds suggest that there is risk out there despite what the equity markets are
saying.
