Overall, July was very positive for stocks and fairly weak for bonds. Globally, much of near-term momentum has been driven by emerging markets. This trend has been persistent all year and we think it is likely to continue. Surprisingly, commodities have recently turned around, particularly in energy and more specifically oil. This could just be a bounce off the bottom, but it is consistent with an expanding global economy.
Momentum measures the rate of acceleration, either positive or negative, in a security’s price and may indicate which markets are positioned for gains or losses. Investing based on momentum entails establishing long positions in securities with positive recent returns and short positions in those with negative recent returns. Momentum in asset classes may illustrate the development of trends in the market.