Debate continues about whether the longest recession since World War II is nearing an end. Some pundits have categorically declared that the worst of the financial crisis is over. Others like the World Bank have just lowered their forecasts for global growth.
Major stock indexes failed to react after the Federal Open Market Committee, at its meeting last week, said it would leave the federal funds rate unchanged. The Fed signaled that while the pace of economic contraction is slowing and the risk of deflation had eased, the positive data still stops shy of recovery.
In general, both global economies and stock markets appear to be entering a transitional period. While the worst appears to be over, global economies must readjust to the notion that debt isn’t a sustainable vehicle for growth. And global stock markets are consolidating gains after an impressive relief rally over the last four months.
The big news in your Global Stock Investor portfolio was from Taiwan, where the Ministry of Economic Affairs announced yesterday that it would allow investment from mainland China in 100 industries and projects. With cross-strait relations as good as they have been in 60 years, this will act as a bullish catalyst for your position in iShares MSCI Taiwan Index (EWT).
Overall, although many of your current Global Stock Investor positions are off of their highs, with global markets having just closed their best quarter in a decade, I continue to remain bullish in my outlook for the rest of the year.
Portfolio Update
The Wisdom Tree Dreyfus Chinese Yuan Fund (CYB) was flat on the week, providing a stable influence to your Global Stock Investor portfolio with exposure to this undervalued currency. CYB remains a defensive BUY.
The iShares MSCI Taiwan Index (EWT) climbed back above the $10 level this week on the bullish news about improved relations with the mainland. With the Taiwanese market rallying over 2% overnight and Taiwan still among the most oversold of the major emerging markets, EWT remains a long-term BUY.
Freeport-McMoRan Copper & Gold Inc. (FCX) bounced strongly above the $50.00 level this week after the company announced quarterly cash dividends on preferred shares. Copper has had a major move up from its lows of six months ago as stores of the metal have been falling, and the global economy recovers. FCX is back on as a long-term BUY.
ICICI Bank Ltd. (IBN) breached the $30 mark this week before closing at $29.50 yesterday. Indian stocks appear to have hit a short-term bottom, and I expect IBN to resume its upward trend soon. IBN remains a BUY.
Market Vectors Gold Miners ETF (GDX) ended Tuesday at $37.82, a disappointing close to a day that (like the week) had begun with the ETF about to breach the $40 level. Nonetheless, this leveraged play on the price of gold remains a long-term BUY.
Chemical & Mining Co. of Chile Inc. (SQM) recovered slightly this week. Expect this stock, one of the strongest stocks in one of 2009’s strongest markets, Chile, to soar on any positive shift in sentiment. SQM remains a BUY.
The UltraShort Lehman 20+ Treasury Pro Shares ETF (TBT) fell this week as inflation fears appeared to recede. Don’t be fooled. Inflation is still coming, and with TBT as oversold as it has been since December, this is a good time to add to your position. TBT remains a BUY.
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