SUMMARY. The first quarter of 2015 was fascinating. In stock market terms Japan was the star, closely followed by Europe. In contrast real world economic indicators out of the US are not great, but markets are unmoved. One to ponder.

The end of the first quarter is upon us.  It was endlessly fascinating, and unfolding story lines promise to keep giving in the months ahead.

A glance at the best performing global funds and sectors suggest that Trash Was King.  The top 10 funds were dominated by Japan, in fact 9 out of 10. Actually Japan is only in the trash category if judged by its overwhelming government debt.  Alternatively, if you judge it by actual company profits (not forward projections/hopes), valuations, domestic cash committed to buying equities, and political and social cohesion, it remains rather attractive.

Japan (up 16%) was closely followed by Europe (up 10%), despite Europe failing on profits, politics, and social measures.  Clearly action by the ECB alone can buoy their markets for some time.  Precisely how that unfolds remains in the lap of the Greeks.

Just be wary.  With nearly a third of the euro area’s $6 trillion of government bonds yielding less than zero, you must question whether this signals something fundamentally wrong.  Put another way, bond investors are paying the Spanish government for allowing them to buy their bonds – a guaranteed loss for investors.  Hmmm.

The UK and US stock markets have spun out positive returns in Q1 (6% and 5% respectively) but somewhat less than Europe and Japan.

The UK election is a major worry for global investors.  Never has there been such an open race, with so many possible outcomes.  This uncertainty spooks investors, and has also been reflected in house buying activity in the wealthier parts of London (assisted by fewer Chinese and Russians, and anyone else previously buoyed by a bubbly oil price).

With equity trading volumes thin, the US stock market was perhaps bound to falter as the hot money chased the latest QE story to Europe.  But there is more, which is perhaps more worrying and little reported.

The US economy probably peaked mid-2014; US corporate profits are faltering to an extent not seen for 5 years; US housing remains stagnant despite uber low rates; wage growth is falling; falling unemployment is due to burger flippers (or similarly low paid jobs); consumer confidence is faltering; and retail sales have declined over the last 3 months at a rate that coincided with recessions every time except early 1987.

Plummeting oil prices were going to boost the US consumer spending, and the US economy, to another level.  Some economists are still puzzled by why this hasn’t happened.  It’s all about confidence.

Against this negative background the US stock market is largely unmoved, and economists think there is no risk of a recession.  Yet it is reported that the US stock market has just enjoyed its longest bull market since World War II, as well as being the third strongest six-year run since 1900.

The other two were 1929 and 1999.  Just saying.