09.07.2009
The second quarter of 2009 turned out to be quite interesting one. Euro, stock indices and commodity currencies finished the quarter with large gains. The movement of major instruments was in the second quarter as follows: crude oil gained 40.74%, gold gained 0.52%, euro gained against the dollar 5.7%, 10-year note dropped 6.3%.
Treasuries managed to establish a new uptrend at the end of June. This trend will most likely continue as yields are currently quite attractive.
The stock market rally that began in March has found its end for now. Those who were expecting a V-shape recovery were wrong. It is now clear that the excitement about the new stock market uptrend was way too unjustified. It will take many more quarters for the global economy to find its legs and to stabilize. Labor markets, consumption and industrial production levels are still guite depressed and consumer confidence is not giving any support as well. It is a depressing situation no matter how you look at it or where.
We traded the following instruments in the second quarter:
- gold futures and options;
- silver futures and options;
- cocoa futures and options;
- crude oil futures and options;
- soybeans futures and options;
- soybeans futures spreads;
- euro futures and options;
- japanes yen futures and options;
- sterling futures and options;
- US 30-year bond futures and options.
We did not have problematic positions in the second quarter and all strategies worked well. From the positions listed above the largest proportion of profit came from trading soybeans, crude oil, japanese yen and US 30-year bond.
The third quarter that has just begun will most likely be quite boring as historically summertime movements are limited and therefore there's no volatility. But we still expect positive trading results in regards to trading sugar, soybeans, crude oil, wheat, treasuries and some currencies. Stock markets will not move much but there's downside pressure which will end at the end of October.
We believe that the major instruments will close the third quarter compared to the second quarter as follows:
- S&P 500 stock index ↓
- Crude oil ↓
- Gold ↓
- US 10-year note ↑
- Wheat —
- Corn —
- Soybeans ↓
- Sugar —
- Euro ↓
- Sterling ↓
- Japanese yen ↑
The third quarter will be a real test for the real economy, consumers and for those who trade the financial markets. Stock markets are currently extremely vulnerable and the same can be said about commodity and credit markets. We believe that those who are currently having their portfolios fully invested are making a harsh mistake. We are still not out of the woods with financial markets.
One could expect quite positive news from the US this third quarter. Positive surpisis could come from the labor market in terms of fewer jobs lost. Europe will most likely not do as well as the US. Europe is behind the US in its economic cycle and therefore economic situations may well get worse in Europe and pressure the EUR/USD exchange rate which in our belief is overpriced.
Spada Capital invests only its own equity and sometimes attracts debt capital.