Sunday, May 22, 2011

For global investors - time to play defense

During the past eight months, strong corporate profit growth, an accommodating credit market and the effects of QE2 provided an investor friendly environment in many markets. Recently, there are signs of increased economic stress in both the U.S. and Europe, while elevated levels of inflation are challenging many emerging markets. This past week, firms reducing their forecasts included retailers The Gap Inc. and Aeropostale, Inc. Additionally, Gregg Steinhafel, CEO of Target Corp. said "while the U.S. economy is showing some signs of improvement, we expect the recovery will continue to be slow and uneven, particularly for more moderate-income households," and suggested a "need to see further improvements in housing and income growth before they'll have the capacity to meaningfully increase their discretionary spending."

MY TAKE: Investing is a complex process that requires assessing a broad array of economic data and investor behavioral trends. Many of the market indicators I monitor, including global equity, volatility, commodities, credit default swap and currency indexes suggest maintaining a cautious investment approach at this time.

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