Over the past month, I’ve maintained a bullish stance and have recommended that readers put their trading capital to work in some of the world’s more speculative markets (see “ECB Could Trigger Monster Rally in Spanish Stocks” and “Access Africa”).
Today, I’m going to reiterate my position that, in the age of competitive quantitative easing by the world’s central bankers, it makes sense to err on the side of bullishness.
The domestic news here in the United States continues to be lukewarm at best, China continues to revise its growth estimates downward, and the European Union is probably in outright recession. But over the next several months, I do not expect any of this news to have much of an effect on global markets. Bernanke, Draghi & Company have awakened the long-sleeping animal spirits in investors, and “Big Money” hedge fund managers and institutional investors are frantically trying to catch up to their benchmarks before the end of the year (according to Barron’s, the average equity-focused hedge fund has had a return barely half that of the passive S&P 500 in 2012).
This stimulus-fueled rally will eventually end, and when it does I expect it to end poorly. But until we see signs of a real breakdown, it makes sense to maintain a bullish allocation. I expect corrections—when they come—to consist of sideways action and not steep declines. This has been the case for much of the past two weeks.
This week, I recommend investors take a look at India via the iPath MSCI India Index ETN ($INP).
India is generating a lot of buzz in recent weeks due to the proposed economic reforms of prime minister Manmohan Singh. These reforms—which are needed for long-term growth—may or may not actually come to pass. But in the short term, just the possibility is enough to restore some much needed confidence in the Indian market.
The usual caveats apply here; while I am bullish on emerging markets right now, sentiment can turn on a dime if Europe slides back into crisis. Use a stop loss appropriate for your risk tolerance.
Disclosures: Sizemore Capital has no position in any security mentioned in this article. This article first appeared on TraderPlanet.
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