A Closer Look at Market Conditions

The steady bullish run from capital markets was knocked back a step this past week. Despite the positive light the Stress Test and NFPs were cast in this past week; the potential for demand, production, earnings and return are still suffering. Perhaps the more stable advance comes from commodities. The tested its highest levels for the year as the sharp drop in commodity production may have finally met the slow and tentative rebound in production that will eventually turn into positive growth. Equities are far more uncertain. Earnings will struggle to stay positive and investors are nervous that the government could change the rules at any time.


Risk indicators have leveled off somewhat over the past week. The index has rallied over the past few days back above 14 percent. For equities, the rise in the VIX has been far more controlled; but the shift has been notable. This shift has come despite the passing of major scheduled event risk including central bank decisions, major event risk and most prominently the Fed’s Stress Test results. Why would risk and the sense of uncertainty rise after such an influential round of market fodder? Investors are now left to wonder how a recovery will actually progress and whether the government can allow the market to take over the responsibility in a timely fashion.