Foreign markets fell further than did the US in the deep panic of mid 2008 / early 2009. In turn,
they rallied far faster than the US in the opening months of the global bull market. However, since
mid 2009, the US market has gradually regained and maintained relative strength on a global basis.
It has been a classic "easy money" bull here, with low interest rates and inflation and a powerful
recovery of profits, all underwritten by the most expansive Fed policy since the 1932 - 1945 era.
QE2, the Fed's latest policy of liquidity infusion, is slated to be retired on 6/30/11. Already, there
is plenty of chatter about what monetary policy may bring following the end of Jun. A comparatively
tighter policy may bother all the worlds' stock markets initially, but resumption of a positive
environment could leave the US in a less favorable position via a number of other segments of the
global market and result in a step up in global diversification by US investment managers.
Excluding the US, the global market has been dogging it for the past nine months. So far this
year, 56% of the world's bourses are up, but only 16% are doing better than the US. There has
simply been no need for the big US players to wander from home. As we approach the big
moment later in the year, the global environment should get a more careful assessment.
For my money, the Fed ought to go right into QE3 if business credit demand and broad measure
liquidity growth do not soon accelerate markedly. If there is a QE3 program, it should be
more moderate and open ended and the Ron Pauls of the world should be told to go stuff it.
This view, as you might guess, is the minority view as of today. One more point. Mr. Obama
is now on tap to run again next year. You can bet his economic policy people are going to
desire a probing discussion with the Fed before They pull whatever trigger They are going to
pull on 6/30.
$SPX in a global context.
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