If a correction in global markets is coming in September, it didn’t start the day after Labor Day, as investors came back from their vacations ready and willing to add to their riskier positions. As a result, your Global Stock Investor portfolio had one of its best weeks of the summer.
With Chinese stocks rebounding sharply after their recent sell-off, Asian stocks rallied strongly. Both the iShares MSCI Taiwan Index Fund (EWT) and the iShares MSCI South Korea Index Fund (EWY) hit highs for the year. Both Freeport-McMoRan Copper & Gold Inc. (FCX) and ICICI Bank Ltd. (IBN) jumped by double-digit percentages last week, rising 12.2% and 11.6%, respectively. Your position in the Market Vectors Gold Miners ETF (GDX) finally awoke from its long slumber, jumping 16.3%, as the price of gold flirted with the $1,000 per ounce level. Tighten your stop to $37.50.
Current positive sentiment notwithstanding, financial markets tend to climb a “wall of worry.” And because of global markets’ strong run-up in the summer, expectations of a September pullback dominate the financial media. This is all the more reason to think the pullback might not happen. After all, the stock market actually jumped in both September of 2006 and 2007. The time honored advice of “Sell in May and go away” didn’t hold up this year, either.
Looking beyond September, here’s why I am optimistic for the remaining part of the year. A lot of the very large institutional investors were caught flat footed, missing a huge summer rally. As investment committees of the world’s largest financial institutions meet and make asset allocation decisions for 2010, they will see that the economic green shoots of the spring are now lasting. That means that they will want to increase their exposure to global stock markets. This should benefit in particular your position in global newcomer, the Market Vectors Indonesia ETF (IDX). Once we get beyond this traditionally difficult time of year, I expect your positions to post a very strong Q4.
Portfolio Update
The WisdomTree Dreyfus Chinese Yuan Fund (CYB) was flat this week. With China stepping up efforts to internationalize its parochial currency, the CYB remains a defensive BUY.
iShares MSCI Taiwan Index Fund (EWT) rose 7.75% this week, hitting a high for the year of $11.81 yesterday as the technology sector outperforms across the globe. With Taiwan up 15.11% since our initial recommendation, EWT remains a BUY.
iShares MSCI South Korea Index Fund (EWY) jumped 4.5% this week, and also hit a high for the year, as Asian markets regained their footing. EWY remains a long-term BUY.
Freeport-McMoRan Copper & Gold Inc. (FCX) soared an impressive 12.2% this past week, closing at a high for the year of $68.00. It’s now up almost 18%, after you re-entered the stock on July 22. Your bet on “Dr. Copper” remains a BUY. Tighten your stop to $54.50.
ICICI Bank Ltd. (IBN) shot through the $32 level yesterday — soaring 11.6% and closing just under a high for the year. With lending and borrowing interest rates in India bottoming out, India’s No. 2 lender remains a BUY.
Market Vectors Indonesia ETF (IDX) rose 4.6%, recovering to levels not seen since mid-August. A prediction: Indonesia will become a new favorite among big money institutional investors, and will continue to soar in 2010. The “new BRIC” remains a BUY.
Market Vectors Gold Miners ETF (GDX) was your biggest gainer this past week, jumping 16.3%. Remember to tighten your stop to $37.50. Finally breaking out of its narrow trading range, GDX remains a long-term BUY.
Chemical & Mining Co. of Chile Inc. (SQM) jumped 5.3% this week. Locked in a tight trading range, this stock will soar once it breaks out to the upside. Although the stock is up 20.86% since our initial recommendation, its flat performance in the last few months is testing our patience. SQM is still a BUY.
UltraShort 20+ Year Treasury ProShares (TBT) jumped back above the $48 level this week. Although the position is up 23.68% since our initial recommendation, with investors suddenly embracing the deflation story, this position may continue to drag. Your bet against U.S. Treasuries is a HOLD.
