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I think US stock markets may be running into a wall at this point. Over the last few months its really been M&A activity that has boosted the equity indices through record levels & even then YTD stock markets haven't performed that well on a percentage basis. Sure they are up & the return is reasonable & corporate profits are ok, but not in the context of the P.E. ratios. Now with the US economy showing signs of contraction, dare I say it recession, how can the current valuations be viable? When M&A activity started to pick up around 8-9 months ago, this was a signal to me that equities are on their last spurt higher. All bubbles inflate bigger & go higher than one would anticipate, gold did the same thing when it peaked surging $300 in almost as many months. Perhaps we could see still one more surge, who knows, however there is signs of weakness in the US housing sector, Ford just announced weaker than expected profits. Some bank profits are also weaker & then of course the influence of the Fed, reducing QE probably a lot quicker than most had anticipated. I'm no necessarily expecting a crash but a considerable & healthy correction. How will those M&A purchases look then? With interest rates at zero & if I am correct on equities, gold will get investor interest. Why not, the bond market is depressed & flooded, alternative investments are thin on the ground & hard assets, soft commodities & in particular gold should benefit.
