Markets were in “risk-on” mode Tuesday as stock and commodities exchange traded funds rallied while ETFs tracking safe havens such as the U.S. dollar and Treasuries eased lower.
The Dow Jones Industrial Average climbed more than 200 points and stocks were rising across the board in what has become a familiar pattern for investors. For example, about 90% of stocks listed on the NYSE were advancing on Tuesday. [Global Stock ETFs Rally on Euro Hopes]
U.S. stocks have been moving as a herd as investors fret over Europe’s debt turmoil and the health of the global economy. For example, the S&P 500 has seen a high number of “all or nothing” days recently, which has frustrated the efforts of stock-picking portfolio managers. [Moving as a Pack]
Also, U.S. sector ETFs are moving in lockstep to a degree not seen since the financial crisis. [Sector ETFs Follow the Herd]
“But where correlation between equities has become extremely high – among U.S. stocks it is fast approaching the perfect value of ‘one’– it has also been rising among asset classes as markets react en masse to changes in global macro-economic sentiment,” the Financial Times reported last week. “That increase poses new challenges for investors, many of whom are now asking just how long such herd-like behavior will last.”
The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.