August 21, 2008
I see that many of the issues that threatened markets are starting to go away.
- oil prices reversed from 160 Usd to 110usd, giving some relief to consumers and producers worlwide;
- us housing prices are expected to consolidate in a month or two;
- eur/usd is getting closer to the purchase power parity.
- chinese economy is still strong and buying from several markets (including japan!).
- gold reversed to values below 800;
What should one see in this picture? In my view, there are a lot of conclusions and investment decisions one can take looking to this scenario.
1. Invest USD in stocks related to american consumer: with lower gas prices and a historical low interest rate consumers will get more money to spend. The end of the housing prices free fall will be the trigger. Markets will only price this in the year end, but you should invest right now. Avoid stocks related to housing and financials as these will recovery slowly.
2. Run awaw from us exporters, but don't get short on it. World demand will still be strong. The same for energy stocks. I'm still expecting susteined oil prices in the next coue of years, now probably with a stronger us dollar and with nominal prices lower.
3. From the previous i'm still bullish in canadian stocks and CAD, namely agains euro and pound. Concentrate on sectors that will not suffer from the dutch disease.
4. China and brazil will remain strong due to internal markets dynamics. Internal demand will boost imports and then helping to increase demand from external countries.
5. Eurozone and japanese exportes will be among those who will benefit from the forex movements and an strong worls demand. Investement in these companies in local currencies shall give you na extra return. If you are not na eurozone investor don't forget to cover your euro exposure.
6. I expect interest rates to increase in us, remain unchanged in eurozone and decrease in uk, due to different stages on the housing crises. I would be in position to get short on fotsie in pounds during the next 6 months because i expect retaillers and financials to suffer even more.
7. I will repeat myself, but i'm really optimistic on the japanese market. The increased demand coming from china may be exactly what this market needs to get in position.
These are my views. I hope that yours are different from mine. I expect to hear your views from your right now. Please send me any comment you wish.