Understanding the markets

• Equities are declining.
• Commodities - including gold, oil, agriculturals - are sagging.
• Bonds are strong.
• The economy is weak and weakening.

What is going on? Forget about Europe and the government deficit for a second. These markets are responding to basic cause-and-effect forces.

1. Our proprietary financial risk indicators are rising. They are important “leading” indicators of the economy. Their rising trend leads to a weaker economy. The economy will strengthen after several months of decline in our leading indicators.
2. The rise in financial risk and the prospect of lower earnings due to a weaker economy cause equity markets to decline. Stocks will rise when our financial risk indicators show a visible decline.
3. Commodities are declining because the economy is weakening. They will strengthen when the economy strengthens.
4. Bond yields are declining because the economy is weak. They will rise when the economy starts rowing at healthy and sustainable pace. This is the time when investors start worrying about inflation.

Our financial risk indicators are regularly featured in each issue of The Peter Dag Portfolio and in our weekly Market Update.

More details in my The Peter Dag Portfolio and my educational videos on www.peterdag.com.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
2009 Market Timer of the Year by Timer Digest

To find out more about my in depth views of the markets and my strategy just visit our website https://www.peterdag.com/ where you can subscribe to The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific investment portfolio.

Disclaimer.The content on this site is provided as general information only and should not be taken as investment advice nor is it a recommendation to buy or sell any financial instrument. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.