BEST HINDSIGHT TRADES OF Q1 2009: LONG EMERGING MARKETS, LONG USD/YEN, SHORT U.S. FINANCIALS AND SHORT LONG-DURATION U.S. TREASURIES

The following are the key trends from a survey of global asset class performance year-to-date:

1. Emerging market bonds as well as equities outperformed. The BRICs markets are back.India did well despite the general election uncertainty.
2. Duration exposure in the U.S. treasury market did not reward given significant supply issues, but the TIPs market surged as break-evens normalized.
3. The commodities downdraft seems to be over, suggesting that the global economy has bottomed and the inventory adjustment process is near its end.
4. The U.S. dollar gained ground in 2009, building further on the rally that started in 2008. The yen performed poorly as Japanese export concerns finally caught up with the currency.
5. Gold remains roughly unchanged buoyed by the twin forces of risk-aversion and the likely inflationary impact of the global policy moves.
6. In line with the overall emerging market resurgence and commodity revival theme, materials led sectoral performance in the U.S. Not surprisingly, financials lagged.

Global Asset Class Performance (2009 YTD)

Source: Market Watch