Tiho Brkan | Jan 04, 2013 11:47AM ET
The global economy has been showing a bit of resilience as of late, with the manufacturing index recovering back toward 50.2 in December from 49.6 in November. Stabilisation is seen in U.S. and China at present, while the Euro zone and Japan continue to deteriorate. However, the question is weather or not the 2011/12 economic soft patch is a bottom from which another expansion period will start?
Chart 1: Recovery in global manufacturing, but for how long?
Chart 2: Global investors view the economy in a late cycle with 12% seeing a recession
Chart 3: The four year old bull market has returned 120% from its lows
Investors seem to be in disagreement on weather or not the S&P 500 September high at 1474 is a top, but in my opinion this is irrelevant. The point is that the majority of the gains in the current bull market are most likely realised, especially in the earlier parts of the expansion from early '09 to early '11. Technically, we are approaching an enormous resistance area between 1450 to 1550.
Chart 4: Bull market leaders like Apple have most likely topped out
Chart 5: Risk taking appetite and greed have prevailed since August 2012
Chart 6: After four years of rapid expanding, corporate profits could disappoint in 2013
Chart 7: Corporate insiders are currently extremely negative on the U.S. stock market
In summary, I do not see equities as an attractive long term investment right now. If you have been following the blog for awhile, you should also know that I have sold short some U.S. equity sectors, between late July and early September, with a view of lower prices into 2013/14 period. While majority of these positions have not performed at present, as the bull market continues its topping process, I hold a very high conviction that in due time the financial markets are headed for another crisis, equities in the U.S. are heading toward another cyclical bear market and the economy is headed toward another recession.
Note: Over the coming days, I will cover currencies, commodities, precious metals and bonds.
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