Extreme Moves Leave Markets in Rare Territory

If you didn’t pay much attention to global markets last week, here’s what you missed…fears that the global economy is dangerously close to a recession due to the financial crisis in the eurozone and flatlining growth in the U.S. sent assets of all shapes and sizes into a tailspin.

Among the E7 and G7 countries, only two markets increased for the week—Pakistan (up 2.2 percent) and Japan (up 0.5 percent). Russia (down 12.2 percent) and Indonesia (down 10.7 percent) were the leaders in the opposite direction. The average return for the 14 countries was a 5.7 percent decline.

Many investors have used gold and other commodities as a haven from recent volatility, buoying prices while equities sunk, but even those investments weren’t immune to the wave of selling. Silver was hit the hardest, falling nearly 24 percent, with copper (down 16.5 percent) and platinum (down 11.2 percent) not far behind. Gold and oil were down roughly 9 percent and the yellow metal was down more than $100 during intraday trading on Friday.

The U.S. dollar, in contrast, was up 2.2 percent. Much of the dollar’s rally came after the Federal Reserve announced the creatively named “Operation Twist” on Wednesday. The Fed will sell $400 billion of short-term securities and buy an equal amount of long-term debt. The goal is to push down long-term interest rates, which would spur economic activity.

As a result of last week’s actions, the S&P 500 Index is just slightly below two standard deviations from its mean over the past 60 trading days. The MSCI Emerging Markets Index is at a similar position, just greater than two standard deviations from its mean over the same time period.

SP 500 60 day Oscillator

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via Extreme Moves Leave Markets in Rare Territory.

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