WSJ.com is available in the following editions and languages:
Thank you for registering.
We sent an email to:
Please click on the link inside the email to complete your registration
Please register to gain free access to WSJ tools.
An account already exists for the email address entered.
Forgot your username or password?
This service is temporary unavailable due to system maintenance. Please try again later.
The username entered is already associated with another account. Please enter a different username
The email address you have entered is already in use.Please re-enter the email address.
Send me information about more WSJ features
Create a profile for me in the Journal Community
Why Register?
Privacy Policy | Terms & Conditions
As a registered user of The Wall Street Journal Online, you will be able to:
Setup and manage your portfolio
Personalize your own news page
Receive and manage newsletters
Receive and manage newsletters
Remember me Forgot your password?
Digg
There are, of course, many opinions as to where developed-market stocks will go from here but, it seems, there may be one fairly simple answer: wherever the U.S. dollar goes relative to the Swiss franc.
According to analysis from Societe Generale, the one-month correlation between the S&P 500 index and the USD/CHF pair is currently no less than 0.91, and that’s high. A correlation of one would mean the two assets moved together perfectly.
On one level, this particular link seems like a fairly obvious one. Surely, it’s just our old friend the financial crisis risk trade written down another way isn’t it?
When risk-assets are in vogue, investors want stocks, when they don’t, they prefer the haven of the Swiss franc. There’s nothing wrong with that thesis, even if there’s nothing very new about it.
What is perhaps more interesting, though, is the fact that the correlation has endured despite the strenuous efforts of the Swiss National Bank to shoo risk-averse investors out of its rampant currency.
Recall that, in early September, the SNB said it was going to flog the Swissie in essentially unlimited quantities, until the foreign exchange market’s pesky refugees got the message and paddled their lifeboats off somewhere else. The franc may have been appealing to international investors, but it had climbed too high for its homeland’s business sector.
From the heady correlation it would appear that the SNB may yet have more to do, even if its focus is on EUR/CHF rather than USD/CHF. With the Swiss’ cards on the table in Zurich, the dollar for all its faults stands alone as the one main haven without an activist central bank trying to dissuade investors. Remember that the Bank of Japan has also fired warning shots across potential yen buyers’ bows.
With that in mind, it will be interesting to see whether this correlation stays high for much longer.
MySpace
Digg
del.icio.us
StumbleUpon
Error message
The Source is WSJ.com Europe’s home for rapid-fire analysis of the day’s big business and finance stories. It is edited by Lauren Mills, based in London.
Read Full Article »