Global Macro Update: Equities Still Dominate, Gold Remains Bearish
Tiho Brkan | May 23, 2013 02:37AM ET
- Equity indices continue to dominate the overbought technical levels. In particular, United States and Japanese equities have performed well as central banks in these two countries have done the most monetization (both countries are extremely indebted). Mexican equities, on the other hand, have been falling rather rapidly in recent weeks, which could signal that the overvaluation in this region is about to enter a corrective mode. Commodities also continue to remain out of favour with investors, who do not see inflation as a threat nor expect interest rates to rise anytime soon. As expressed in the chart here ). Commodities were also hit very hard too, apart from Gold. It refused to correct by even 20%. However, eventually the asset did break down below the $1,530 per ounce. I believe this to be a healthy correction for the bull market to resume. Therefore, Golds correction shouldn't be "why puzzle" nor a "manipulation blame". The asset was overdue for a correction and will most likely keep correcting for a few more weeks, months or even quarters. The quicker any asset with strong fundamentals can shake weak heads and over-leveraged players, the quicker the rally can resume.
- Finally, it should be noted with very high caution, that US equities remain the only major asset class not experience a bear market or an annualised negative performance during the current investment cycle. This too is also very rare. As a matter of fact, the last time US equities posted even a -1% annualised total return was back in middle of 2009, almost five years ago. This asset class now presents most risk to long term investors. My advice is for one not to chase rising markets, instead one should invest in oversold assets with improving fundamentals.
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