The slide in global stockmarkets continued today (and tonight in Asia). Not getting a lot of attention yet in the mainstream media (in the US at least) and in the financial media commentators are mostly remaining bullish. Bill Gross has posted his annual economic outlook. The bottom line is he still expects inflation to be low and bond yields in the US to remain in their recent range. He expects global growth to remain relatively strong. Others also think that the inflation outlook is benign but that global growth is likely to slow. This is on the whole my take, but I think the US stands a strong risk of outright recession in the coming year. Barclay's Bank warn that current conditions are very similar to those in 1987. I already made the same analogy with the big caveat that resource prices have been rising now, which wasn't the case in 1987. Others are similarly bearish but are looking for the main decline in the markets to occur in the Fall. There is no reason why we have to wait for the Fall for a crash to occur. On the other hand a slow slide across the midle of the year is entirely possible as are strong countertrend rallies on the way.
Something interesting is that bonds have begun to rebound from their recent lows. The sell-off in gold and other commodities may also have exhausted itself. I don't see us as being in a commodity price bubble. There is a genuine shortage of supply in many commodity areas. Perhaps the long-term trend of declining real resource prices (except for forest products) has begun to reverse? In the very short-term I am expecting a flight to safety to US government bonds and gold as stocks slide further. Regarding my own portfolio today, I rolled my QQQQ put options to a lower strike to free up some equity and buy gold with it. I also shorted more Google shares.
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