After a positive first quarter in 2010, the second quarter was a turbulent one.  The markets oscillated between “risk love” at the beginning of the quarter and “risk aversion” at the end of the quarter.  In April, strong equity markets and increased risk appetite were quickly pricing in a traditional “V” shaped economic recovery.  May, however, quickly became the opposite, as the markets rapidly moved 180 degrees to fear a relapse into a double dip global recession.  

In my most recent blog in April, I highlighted that the easy money had been made and that we expected a “tricky” volatile period for equities over the next 6 months.

The first quarter was a positive one for most financial markets. As expected, it was also a volatile quarter, with positive and negative forces strongly to the fore in both directions, with the “good” finally winning out for the quarter. It is also worth noting that it’s now just over 12 months since the bear market lows of March 2009. The MSCI World Equity index rose by 9.6% in the quarter, and stood 67.7% above its March 2009 low, while the Merrill Lynch over 5 year sovereign bond index rose by 3.1% and 9.6% over the same periods.

Looking ahead

Further Market Gains in 2010, but expect Volatility.

Trends in corporate profit reports are helping stock markets.  But it's cost cutting that has improved profits, not better sales growth, and this has implications for the economic recovery.

Over the past month the second quarter profits reporting season has been very helpful for equity markets. Profits have been better than expected, with upside surprises comon across large US companies that have reported so far have beaten expectations.

Our Chief Investment Officer, Noel O'Halloran, takes a look at the quarter ahead.  The title says it all: A brighter quarter, recovery begins and the bear market ends.

Quarter 1 review-Reality over Hope, a tough start to the year