Everyday, Everyday I Have the Blues
By John Stoltzfus,
Chief Investment Strategist
Trend Analysis
Market Strategy Radar Screen Weekly - February 1, 2016
In this article:
- Commodities
- Gold
- Currencies
After the Gold Rush
The market’s recent turbulence reminds us of what happens at the end of a boom
In meetings last week with clients and advisors across the middle Atlantic states of New York, New Jersey and Pennsylvania, we were frequently asked for our opinion on markets’ recent activity, particularly about the volatility, depth and degree of selling that has occurred over the last few weeks among stocks stateside and globally.
We were also asked just how much longer we expected the corrective phase to go on for even as the second leg of a rally in oil and stocks began and moved prices higher last week.
In responding to these and other questions last week, it occurred to us that at least some part of what has been roiling the markets and concerning investors of late has been an effect on segments of the market that remind us of what happens at the end of a gold rush or of any boom, bust and recovery cycle--a process of unraveling of trends long in place and a repricing of assets affected in the process of change.
Booms can take flight in different forms depending on what they are linked to, such as the cost of capital and the appeal that the assets involved have for investors. In our experience, bubbles in real estate, technology and finance tend to be the most seductive and encompassing in convincing investors to embrace and overbid them, while commodity- and currency-related bubbles tend to snare fewer investors due to their complexities and less accessibility for most investors.
Of course, the size of the boom and its impact on rising, bubbling and correcting will be tied to the influence of the asset class, sector weightings and the extent of the connectivity to other classes of assets at the center of the corrective cycle taking place.
The fact that commodity prices and currency fluctuations are at the core of recent market events has added to the turbulence and complexity of what the markets and investors have gone through.
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