Next Wave of Investment Cycle in 2013 - Reymount Investments

105 38
After the stimulus announcements from US and Europe, markets which were trading at extraordinary prices mostly a kind of over-speculation finally started correcting this month of October. US growth slowing to 1.3% with fiscal cliff mounting towards January 2013, followed by recession worries lingering major European Union countries like Greece, Spain & Italy and Chinese economic growth slowing to 7.4% (which most analysts believe to be the bottom out of downtrend) for the last quarter. Anyway, the above mentioned fundamentals were not been impacted by financial markets worldwide - sounds quite ridiculous. However, reality is far beyond speculation and it seems now that investors came to realize facts very late. Stock Indices which are the primary signals of each nation's economy has lost its correlation with economy for a long time. US economy which failed to control it's unemployment rate after 2008 financial crisis has not come back to its life, but going deeper into danger with Fiscal cliff kick-starting this January 2013. But Dow and S&P 500 is now trading higher than the levels of 2008 with Nasdaq trading at a hefty PE ratio of 21.2, signaling that stock markets are entirely diverged with the national economy. European markets too have been in the clutch of over speculation from Institutional investors as they were extremely focusing on trading commissions and bonuses rather than hard reality.
Markets normally react in worse economic conditions with investors liquidating riskier assets and stick on to risk-free Government bonds. But when we analyse the 2012 financial year, it can be seen that money flowing into Bond markets were flown to stock markets and commodities purely on speculation basis. But investors losing confidence in Bond markets on sovereign debt crisis in Europe has created a reverse Investment cycle, in other words a contrarian view on Investment vehicle. Now, a question arises on investors mind on what will be the next investment cycle in financial market. Dismal corporate earnings and low guidance for next quarters will surely bring significant pressure on bottom line. So the right choice is to have a healthy correction in markets and market participants are of view that correction is likely to happen for the remaining year of 2012, as confidence in Central Bank assurances were lost by marketmen. Fiscal cliff which is expected to happen in January 2013 may deter investors to invest in riskier assets atleast for the near term. This might bring dollar regaining its strength back and investors' attention may once again turning towards safe haven Bonds in strong economies. However, it is likely that investors may shift their investments towards stable economies with low debt to GDP ratio such as Australia, China, Turkey, Russia, Sweden and Indonesia. US Government's effectiveness in tackling Fiscal cliff will be a crucial factor to be watched by investors, as any slowdown in US economy with further downturn in Europe will severely bring down global economic growth and investments.
Subscribe to our newsletter
Sign up here to get the latest news, updates and special offers delivered directly to your inbox.
You can unsubscribe at any time

Leave A Reply

Your email address will not be published.