Entering text into the input field will update the search result below

Global Equity Markets - Blip or Correction?

Apr. 14, 2011 1:27 PM ET
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Seeking Alpha Analyst Since 2010

Granitehills owned and founded by Mark Ridgway in 2009. I have worked in the financial industry for 16 years. My area of concentration is derivatives. I have used derivatives in many different areas (trading, portfolio management, hedging, pricing and structured products). In 2009 I set up Granite Hills Investments. I am now providing independent derivative strategy to clients. Basically I use listed options to implement my macro views.
Recent sessions have seen global equity markets to be somewhat mixed. The question is whether this is a temporary blip or the start of a downward correction.

The first thing in my point of view to point out is the powerful and quick correction markets had following the natural disaster in Japan. Since this correction has completed itself markets have started to focus again on real economic issues.

The main issue in my view at the heart of all markets across all asset classes right now is the theme of inflation and whether we are entering into a sustained inflationary period.

While in the longer term inflation may well become a more serious problem given the fact that central bankers generally tend to get the timing wrong. The ECB for example has probably moved too early and the FED will probably move too late.

In the short to medium term though moderate rising inflation to more normal levels will be good for the economy and in particular for commodities and equities.

Therefore, I see the current movements in equities more as a short term blip rather than a correction. This view is backed up by the VIX remaining below 20. Also the put/call ratio in terms of option volume remains low. Both these indicators show that investors are currently less interested in hedging.

Also bond yields while they have fallen marginally in recent days they remain well above the lows seen in October 2010 and more importantly the upward trend in yields remains clearly intact.

The recent sell off in the USD as well as showing some concerns regarding the state of the domestic US economy is also pointing towards a willingness of investors to invest in more risky assets.

This all points to the current mixed feeling towards equities being temporary in nature. I expect equity markets to remain in current trading ranges for the time being with a skew to the upside.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.