Record Scratch… You Might Want to Put Your Clothes Back On
- Joshua M Brown
- June 29th, 2012
The thing is, reactive rallies after Euro Summits don't provide much in the way of sustainable gains. Hate to rain on the party, especially given how well everything's acting with the Dow up 200+....
Floyd Norris has the numbers, via Barclays:
There is a pattern here. Barclays counts 18 European summit meetings since the beginning of 2010, before this one; decisions seeming to indicate action were announced after 10. Barclays notes that global markets tend to react positively, but the reaction typically fades.
Over those 10 two-day stretches — the day of the meeting (or the Friday if it was a weekend affair) and the day after — I calculate that the euro rose a net 4.8 percent against the dollar. The MSCI European stock index, measured in dollars, was up 9.6 percent. Not every immediate reaction was positive, but many were.
But over the entire two-and-a-half-year period, the euro is down 11.7 percent against the dollar and the European stock index is down 17 percent.
Floyd reminds of the twin explosive rallies of October 27th and November 11th last year when the Euros made a series of "major announcements." Within a week markets were lower again.
Look, I'm not saying don't enjoy yourselves (I sure am). But maybe have the designated driver warm up the car and get out of that broom closet with your best friend's wife.
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.