European Sovereign Debt worries, Berlin's rigid stand on its role in bailout of troubled EU economies, Overheating of Chinese growth engine, inflation woes in India, Tensions in Korea, Obama's growing unpopularity, trouble with the Euro - where is all this taking world markets to?
Will the Santa Claus rally in world stock markets, specially in the European and the America fade as we enter into 2011, after all, these economies are essentially on a life support system. Printing money is not the solution, specially without the assets to back it. We have already had the tasters of the withdrawl of loose fiscal and monetary policies. Slight possibility of rate increase plunges the markets. Will 2011 mark exodus of funds from high return markets to the US stocks resulting in growth imbalance between emerging and developed economies - this time developed economies growing (at least momentary pseudo growth for few quarters) at cost of Emerging Markets?
Stocks rising at the bad news, stocks rising after a good news, stocks rising even though good economic news is already priced in - all this is a ball game of the big corporate players who want the stock prices to rise so that they can recoup the losses that they had booked via write downs. Its simply a creation of an asset bubble using cheap money.
ReplyDeleteSee major pull backs by 3rd quarter of 2011 - see Dow Jones Index below 9000 mark and S&P 500 Index below 1000 points.
Santa Claus rally has historically lead S&P 500 upto 3.4% higher between US Thanks Giving and Christmas. This year, it is already up 3.5%. And coming week is the only remaining full 5 working day week this year. S&P 500 is already overbought. We would have seen a major sell off if China had raised interest rates this weekend to counter inflation. It has become more risky as China avoids this move and will put pressure on it in early 2011. Needless to say, we are already overbought. So even if S&P 500 inches slightly more by Dec 31, it will not be able to sustain the gains into 2011. BOOK YOUR PROFITS BEFORE BIG BANKS AND MONEY MANAGERS PLUNGE THE MARKETS.
ReplyDeleteThanks InvestmentGuru, to start this blog. It is good to see a blog which is free from the technical Jargons and is derived from common sense.
ReplyDeleteYou just saved me from getting caught into a long sizeable long position in a bouquet of banking stocks. Looking at the world markets today, looks like we are already getting into a pull back. Please provide signals when to go long and in which sectors / stocks
ReplyDeleteS&P 500 is already overbought, trading at about 15 times the reported earnings. With China raising the interest rate by 25 basis points and increasing the gasoline & disel prices, see a pull back on the global commodity prices, atleast in short run. Nervousness in the thinly traded US markets was already visible on the last traing day prior to Christmas. To add to the woes of retailers, storms in east coast kept shoppers away post Christmas. Home prices are expected to fall. EU soverign debt still is a burining issue. So we have a perfect recipe for a considerable pull back. Looks like the countdown has begun...
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