(Last) May Day

It’s been a long old month...think of all the things the market has had to deal with in May:

-Swine Flu (was that really only a month ago?)
-Delays to Stress Test results
-The leak of Stress Test results
-Most companies under the Sun reporting...and beating (at net level anyway)
-And only slightly fewer placing stock
-The rejoicing reaction of the market to the fact BAC only had to raise $34bn
-Worries that things aren’t hunky dory just quite yet
-Chicago PMI has just come out, QED
-Correlation breakdown as $ stays unloved even on equity down days
-The inflation/deflation argument rages
- Which despite the data showing no real inflationary pressures, has led (arguably) to the big bond sell off we’ve seen.
-UK is put on negative watch by S&P
-Worries USA will be downgraded
-North Korean warmongering

So in short there’s been plenty to think about, be confused, confounded and indeed convinced by. However for all of that, equities have done, well not very much. Stoxx 600 and S&P are up c3%. Volatility has continued to fall with the VIX at 31 and volumes have been far from what any self respecting commission based broker could be happy with. Bigger moves and bigger questions asked in FX and Bonds. Is this the start of a new world order between the assets classes? Certainly the price action looks that way again today with the $ taking another beating. It will take time to pan out for sure but as long as the fear and volatility is absent in equities, it looks likely to continue. What happens if equities take another bigtime dirtnap? I dunno...with all the questions being raised about the US in the recent month, it will be hard to get back into the mode of buying US assets being a safe haven trade.