Equities are not out of the woods yet, but we are watching for signs of a potential end to the current correction. For the US Dow Jones, there is major support at 15,000, at which stage we believe there would be very good value.
Even now, the downside break of support at 15,500 appears to be a false one, and we will be watching over the next few days for a potential entry point. We are already favourably disposed towards US equities via our Bullish US Homebuilders Macro-Industry Strategy view, which is up by 20.7% since initiation in October 2013 and has remained resilient in recent weeks.
Indeed, the robustness of the homebuilders sub-index suggests strength in the US residential construction sector, and earnings results for Q4 2013 are coming out positively (27 companies of 35 in the S&P 500 that have reported so far have beaten expectations). As such, we see no reason to deviate from our overall view that the US economic recovery is firmly 'on', and that equities remain a better bet than bonds. That said, today's non-farm payroll data was well below expectations.
This Week's Trivia Question
Last week's question was something geographical: what is the world's only truly double-landlocked country; i.e. the country is completely surrounded by countries that are also landlocked. (Note: There is a second country that is considered double-landlocked, but this is more contentious, because it contains a small sea and one of its neighbours has a coastline with a large body of water that is called a sea.)
The answer is Liechtenstein, which is bordered by Austria and Switzerland. The other possible answer is Uzbekistan, although we find this answer contentious because the country has a shore on the shrinking Aral Sea, and because its neighbour Kazakhstan has a coast on the Caspian Sea, whose lake/sea status is disputed.
This week's trivia question is about sharp increases in interest rates, in light of the fact that several emerging market central banks have hiked rates recently. Which central bank raised its policy rate by 1,200 basis points in one swoop in early 2009, and days later, by a further 1,500 basis points (to 55.00%) to defend the collapsing currency?