Our Observations: We think this week is a textbook illustration of a risk on market. The biggest gainers were in the emerging markets and Japan while long-dated bonds in Europe and the U.S. were among the biggest losers. It appears that the fears of a larger sell-off have subsided and many investors are preferring to take on risk in their portfolios.
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.