As was highlighted in last week's article, the key theme since 2011 has been declining inflation and economic growth rates. Lower inflation and weak economic growth is not the environment that favors investments in commodities or commodity-sensitive currencies (CAD, AUD).
While the stance of monetary policy around the world has, on any conceivable measure, been extreme, by which I mean unprecedentedly accommodative, the question of whether such a policy is indeed sensible and rationale has not been asked much of late.
Back in mid-March I made the latest of my somewhat rare specific, near-term market predictions, in this case that a US stock market correction or even a crash was imminent. Now some six weeks and a further 5% rally later, I revisit this view.
The stock market rally is continuing to push higher, taking the broader market indexes into record territory. This has put skeptics like myself on the defensive. But the reality is that we aren’t seeing all-around celebration in the market as used to the case in the past.
During the first week of May every year, the maxim, “Sell in May and Go Away,” gets taken out, dusted off and powered up as a reason to sell stocks.
The S&P 500 climbed by 0.52% and the Dow rose by 0.58% to close above 15,000. Both indexes have now reached new record highs in nominal terms. Transports, media, industrials, and banks were leading sectors today and technology and homebuilders were laggards.
Overnight markets were higher, led by Japan, which gained 3.5%. The Reserve Bank of Australia joined the worldwide easy money party last night, as it dropped rates by 25 basis points.
Japan's Nikkei 225 has been on a tear of late and is now up 73.8% from its interim low in November of 2011. Its Monday gain of 3.55% puts the index up 36.41% in 2013.
The Senate has passed, sending to The House, a bill that would impose a requirement that online merchants submit to state tax collection in states where they have no physical presence.
Part VI is the last of the series of reports from the 10th annual Strategic Investment Conference, presented by Altegis Investments and John Mauldin. Dr. Lacy Hunt, of Hoisington Investment Management, presents his views of the impact on economies when they become heavily leveraged.
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