A re-run of summer 2007

Equity and commodity markets around the world continue to look seriously vulnerable to further significant retracements. We are reminded of summer 2007 when we told clients to get out of equity markets.

In our view, a strengthening US dollar is the most likely cause of such an effect on markets. Let us see if we can find a scenario that might readily explain a rising US dollar. Quantitative easing seems to be the currency watchword these days, so let us look at what is happening in the US right now. It seems clear the chances of getting QE3 by the US electorate at this time are virtually nil. People are already feeling the pinch, big time. Falling incomes and rising prices leads to a stagflation for the people. This is not good and they are starting to become militant and vociferou...