If you’ve been following the market this year you’re probably scratching your head right now. I mean, since March the market has gone up and down and up again and we still haven’t gone anywhere. Over the last weeks, gold and oil and energy has outperformed pretty much every single asset class (see here) signalling that things still haven’t changed – and that difficult times still lie ahead for the global economy. But the stock market is resilient and keeps wanting to push on. So if you want to know what is going to happen to the market, just hit the rewind button to May. Yup, the bulls lost heavily. Do I think that this will happen again? Let’s put it this way: nothing fundamentally has changed in that inflation is stil rising and global demand for goods and services is slowing down. The one thing additonal piece of information we have now which we didn’t have in March is that the market can and was severely punished to the extent that a significant uptrend-line has been broken in May. If that isn’t a sign that the market is vulnerable I don’t know what is. So with that combination of hindsight and deja vu, I am happy to continue selling into strength and decreasing my equity/cash equity ratio.
