Sunday, November 14, 2010

Is the tone of the global markets changing?

Since August, when the U.S. Federal Reserve suggested that more monetary stimulus was coming, most markets have moved in an investor-friendly fashion. More recently, concerns have been creeping back into the markets. Dynamics on the investment dashboard include sovereign debt issues in Ireland, a rising U.S. dollar against major currencies, potential interest rate increases in China to curb inflation, a sharp correction in the U.S. Municipal Bond market and a major sell-off in network equipment maker Cisco Systems, Inc. (US: CSCO) who noted weakness in government sector demand among its short term challenges.

MY TAKE: While these dynamics may present a “buy on weakness” opportunity, my Risk Monitor (which incorporates equity volatility and credit data from the US and European markets) leaned a bit more toward caution. As a result, I increased my hedged position, which may be just a short-term trade. Regarding the impact of economic stimulus efforts, I continue to be concerned. I hope that the road ahead is not similar to that of the drug addict – the first fix feels good, the follow-up fixes only result in feeling less bad.

No comments:

Post a Comment