Following a global rally that has lifted major global stock markets 20% or more since March, financial markets are treading water today as uncertainty surrounds the results of the U.S. government’s "stress tests" on 19 of the largest U.S. banks to be released Thursday.
That uncertainty notwithstanding, the tone in global financial markets has turned decidedly positive. U.S. Federal Reserve Chairman Ben Bernanke said he expected the economy to start growing again this year. U.S. officials have confirmed that no large banking institution will be allowed to fail as a result of the stress tests. And importantly, while most U.S. pundits are still focusing on the levels in the S&P 500 and the Dow, emerging market stocks — particularly those that are linked to the Chinese-led recovery in Asia — are now trading at levels not seen since last October. The iShares MSCI Emerging Markets Index is now up 22.29% since the start of the year.
All this means that you can expect your Global Stock Investor portfolio to shift gradually back into stock picks over the next few months. In fact, I am currently working on June’s Global Stock Investor pick, which combines a bet on rising Chinese growth with a once in a lifetime re-valuation opportunity.
The big news in your Global Stock Investor portfolio is this month’s pick, Freeport-McMoRan Copper & Gold Inc. (FCX) which soared a whopping 30.6% last week on bullish sentiment surrounding a global economic recovery. With FCX breaching the $50 level for the first time since Oct. 1, raise your stop to $34.50.
Your position in the UltraShort Lehman 20+ Treasury ProShares (TBT) jumped above the $50 level for the first time since Thanksgiving. The bubble in U.S. Treasuries has yet to pop, but there is little question that with the unprecedented government borrowing, pressure on interest rates is purely on the upside. That’s all positive for your position in TBT. Raise your stop to $42.00.
Look for some movement in the WisdomTree Dreyfus Chinese Yuan Fund (CYB) this week after reports that the Chinese central bank is under pressure to allow the yuan to appreciate because the Chinese economy is still performing significantly better than other major global economies. In a latest sign that China’s economy may have bottomed, a key Chinese government think tank forecast on Monday that Chinese annual economic growth would rise to 7% in the second quarter of 2009, from 6.1% in the first quarter. This is all bullish for the yuan.
Portfolio Update
The WisdomTree Dreyfus Chinese Yuan Fund (CYB) endured some strange volatility in yesterday’s trading. But with economic recovery in China on the horizon, CYB remains a BUY.
The UltraShort Euro ProShares (EUO) ended the week down, as the euro rose against the U.S. dollar. With Europe and the U.K. behind the U.S. and China on the road to economic recovery, and EUO as oversold as it’s been since late March, I expect the euro to resume its downward trend against the U.S. dollar soon. EUO is a BUY.
Freeport-McMoRan Copper & Gold Inc. (FCX) soared this week as the case for China’s economic recovery grows. Raise your stop $34.50. FCX is a BUY.
Chemical & Mining Co. of Chile Inc. (SQM) rose 9.3% this week, even as it paid out an 86 cent dividend on May 1. The stock is now up 36.2% since it bottomed on March 9. Raise your stop to $25.00. SQM remains a BUY.
The UltraShort Lehman 20+ Treasury ProShares ETF (TBT) closed above the $50 level last Friday for the first time since November. Raise your stop to $42.00. Your bet against U.S. Treasuries remains a BUY.
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