1. Market support - The Fed Reserve has been pumping a lot of liquidity into the market in the last few years to sustain the market - the market is fully valued, and I expect the Fed to ease that support, in an attempt to draw the market into more sideways movement.
2. Emerging markets - The strength in Asian markets rests upon expatriated earnings, passive foreigner investment funds, stronger construction and rapidly growing emerging service economies in their own right, but they are still dominated by 'food'. The Asian economies have their Gucci stores, but most still cannot afford these items. When they go shopping, its mostly to look, and mostly to eat, because that is all they can afford at this time. It will be different in a few years.
3. Dow Jones trend - The Dow Jones has historically been a trending market - see the log-linear chart below. This chart offers 115 years of history. So what can we garner from the current trend. There appears to be further evidence for consolidation for a number of years in the Dow before it is able to grow again. The question is why? Property markets in the US are already starting to recover, but everyone is still highly indebted, they are focused on rebuilding savings, and without really a substantive basis for upside, and perhaps some apprehensions about higher taxes, we are not going to see a rapid return of 'big spend' USA. So what if the US government increases taxes and gave the poor tax relief. The problem with that is that it would result in the sucking in of imports. The moral of this story is that this would be great 'stimulus' when the world is really to sustain it, because they are growing as well. Japan is talking stimulus, but perhaps they might wait before they do so. Perhaps its not going to be a sudden injection, but spread over a number of years. I don't expect Japanese stimulus however to result in a substantive rise in imports, and anyway, it would be offset by a competitive yen, so the net effect would be positive. Japan does not have a high reliance on imports because Japanese people consume products 'particularised' for Japan, i.e. Cute TVs and refrigerators.
Asian property markets outperforming Japan Foreclosed Guide Philippines Property Guide
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