Bond Outlook April 15th

If it is true that stock markets rally six months ahead of an economic recovery , then recent rises certainly reflect our hope that GDP will at least stop falling sometime in the autumn of this year. However, we could just as easily be experiencing a bear market rally, as the alleged “green shoots of recovery” look very fragile. The recent rise in commodity prices, another leading indicator, suggests the adoption of a more cautious approach, as historically, a commodities rally has preceded the bottom of a bear market in stocks by a few months (rather than the bottom of economic activity as such)

In one area, however, we can be optimistic almost without proviso: the functioning of the financial markets.