It was another rough week in the markets as investors continued to confront a growing and persistent list of headwinds which include 1) Eurozone sovereign debt issues (Greece has garnered significant short-term attention, but other countries are also at risk), 2) the recovery of Japan after the earthquake, 3) the end of the QE2 stimulus effort, 4) how U.S. policy makers will resolve the debt ceiling and long term budget issues, 5) the potential for a global economic slowdown, 6) instability in the North Africa and Middle East regions and 7) inflation in developing countries.
MY TAKE: Historically, the summer months have been a time of weakness for many markets - “sell in May and go away”. However, uncertainty is not the friend of investors and the level of fundamental uncertainty has increased in recent weeks. In mid-May, I suggested a cautious approach to investing was warranted. Most of the market indicators I monitor (global equities, volatility, commodities, credit default swap and currency indexes) continue to suggest maintaining this stance.