Data quirks--and a gift from Japan--take sting out of lacklustre GDP

While the sequential GDP growth number didn't look good, same-quarter to same-quarter growth has been much less volatile.

Robert Johnson, CFA 1 February, 2016 | 6:00PM

It was yet another week of volatility, with all markets ending on a high note Friday, likely driven by the Bank of Japan's surprise rate cut. (Key Japanese officials denied this was a possibility just a week ago.) That made everyone happy, and everything was up: stock, bonds, commodities and emerging markets. Usually when bonds are up, commodities are down and typically stocks, too. What's different this week?

The out-of-the-blue Japanese rate cut (which now means negative interest rates), combined with continued whispers of more easing by European central bankers and even dovish indications from the U.S. Fed on Wednesday all cheered the free-money crowd, which is now hopeful more cash is headed its way. That served to lift all asset classes. We appreciate the break in the selling, but eventually ongoing earnings pressure and other stock fundamentals could keep a lid on stock market improvement.

However, this was a happy week. Emerging markets, often the beneficiary of easy money cash flows, saw the best performance this week, with funds up over 4%. Commodities were up 3.1%, stacking two good weeks in a row. Again, oil was a key driver, this time on some flimsy rumours that some producers might meet with the intent of limiting production. It could happen, but it doesn't seem to be the most likely case. However, speculators now realize selling short any commodity-related instrument isn't a guaranteed one-way street to riches. The rumours seemed to be enough to end the silly game of reducing oil price forecasts to be the lowest on The Street. The forecast race seems to have ended at US$20 for now.

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Robert Johnson, CFA

Robert Johnson, CFA  Robert Johnson, CFA, is director of economic analysis for Morningstar.

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