Even after early cycle momentum peaks risk appetite tends to ebb, and risk assets tend to struggle for a while: developed equities usually under-perform bonds and emerging equities usually under-perform developed equities, before setting up the next leg higher with somewhat different leadership.

In the last recovery, momentum made its early cycle peak in November/December 2003 but equities made marginal new highs in the three months following: the real correction didn’t start until April 2004, by which time the Fed was starting to signal towards the exit. Emerging equities were down 20% in just over a month, developed markets more like 10-15% over several.

Every cycle is different of course, but we suspect the Dubai World standoff may yet bring that correction phase forward unless a clear and credible restructuring plan emerges rather quickly.

But on that subject we will have to plead the “Grant Amendment”: we have no special insight and simply don’t know.

So don’t ask us: stay tuned to FT Alphaville!

Jonathan Wilmot, chief global strategist at Credit Suisse Investment Bank, is blogging at FT Alphaville for the day.

Please read this Credit Suisse small print

This entry was posted by Jonathan Wilmot on Tuesday, December 1st, 2009 at 13:45 and is filed under Capital markets. Tagged with credit suisse, dubai world, Jonathan wilmot. Edit this entry.