Still Waiting for the Triple Bottom?
by Richard
What a run the markets have had these past four weeks.
But is this the real deal…or just a relief rally as hedge funds and speculators rush to cover their short positions?
Old timers will tell you that the third time is a charm…the third market bottom, that is.
We had the end of year rally off the November lows that technically qualified as a bull market (an increase of greater than 20%). That’s one.
We’ve just run up another 20% in the rally from the March 9 bottom. That’s two.
Most recently, the end of the 2000-2002 bear market was defined by a nine month period and a triple bottom before the bull market of 2002-2007 was officially underway.
Time will tell if history does in fact repeat itself.
What encourages me is that global markets are no longer falling in lockstep.
Some examples, as of the market close for April 3rd:
- US total stock market -5% year to date.
- Global Dow, also -5% year to date.
But look at these hot country markets, year to date:
- Brazil +18%
- Venezuela +25%
- Israel +17%
- South Korea +14%
- Taiwan +20%
- China +33%.
The significance of these outlier markets is that investors are no longer throwing the baby out with the bath water. Each market is being evaluated on its own internal fundamentals.
And the U.S. dollar no longer has the wind at its back.
Its recent strength derived from the left handed compliment of its being the “least bad” of the major currencies.
But the Fed’s effort to reflate the economy by wantonly exploding the money supply will negatively impact the dollar…as reflected in the strong overseas gains shown above.
My family and clients have recently put their toe back in the water, adding recent positions in the Asia Pacific markets.
We continue to add to positions in inflation-protected bonds, residential real estate and domestic equities so that we can surf the tidal wave of inflation just over the horizon.
It’s odd to think that in my lifetime, “sound as a dollar” was a totally irony free vote of confidence in our currency…rather than a sick gag line.
