Anyone who has read my forecast for 2011 saw that I predicted the course of the strengthening dollar, the rise in yields on securities and the decline in stocks and commodities.
Now – what should we expect next?
Do we continue to crash, grow or shuffle?
I will divide the answer by markets:
U.S.: benefited most from the crisis in Europe – “western” investors’ funds have returned to a shelter, the dollar came to be strong (relatively) and the U.S. government securities are high in demand.
In addition – the economic data show some recovery and growth, which prevents Bernanke’s printings that still give the tone, and on the other the desire of money fleeing emerging markets – to return to the U.S. and invest there.
Europe: a big mess, states are in debt, but the politicians are running the show, and while it’s up to them will nothing will change. Italy and Spain are huge countries, and yields on them probably remain at least above 5% (at least in Italy) and will remind us all of the real world in which we live ….
To sum up: Commodities – I don’t expect them to perform too well, I assume that some pad and some will slightly increase, particularly metals will have a hard time to increase with the current Dollar.
Stocks – slow raise – Climbing the wall of concern
Forex – wide shuffle euro – dollar, when the trend is the continued strengthening of the dollar in total, not necessarily because of the problems in Europe, but because of renewed confidence in the U.S.
Bonds – stagnation – depending on recoveries.