Opening Position
December 2008
The year 2008 is one that will be remembered in the history of the financial markets for quite some time. We have witnessed a terrible economic downturn, with financial institutions around the world either closing their doors or crying for help. We have seen the financial markets all over the world dropping to levels not seen since 2003. But the one factor that is comforting is that commodity prices really are falling, which has wiped out all the inflation fears that were spooking us during the commodity bubble period. It wasn’t too long ago, after all, that the skyrocketing prices of consumer staples such as rice and wheat were creating riots in many of the developing countries. And let’s not forget the soaring oil prices that battered all of us.
But in addition to falling commodity prices, we also need to see some easing in the credit markets. Given the recent government global interventions, I believe we will see, if we haven’t already, some type of a positive response in the credit markets. The falling prices in the commodity markets as well as a pickup in the credit markets are two factors that could trigger the start of a recovery in the markets
Typically, the business cycle moves through different stages, with equities rallying in the early stages of an expansion and falling commodity prices in the early contraction period. Once commodity prices hit a bottom and we start seeing a rise in the bond markets, the likelihood of a recovery is indeed possible. I hope we see that happening going into 2009. But it’s just a hope, since there is no way anyone can accurately forecast the markets. It’s always best to be cautious.
And while the market is indecisive, take the time to reassess your financial goals and objectives and determine the best methodology to achieve those goals. It’s always a good idea for the markets to move in an established trend prior to trading them. And there are many technical indicators, trading techniques, or systems that you can apply to help you determine when best to make your entries and exits. It’s a question of what works for you.
I certainly hope that the worst in the financial markets is behind us, and that 2009 brings us better trading opportunities. We at Stocks & Commodities would like to take this opportunity to wish all of you a very happy holiday season!
Jayanthi Gopalakrishnan,
Editor