Stock Market News and Investment Information | Reuters.com

Stock Market News and Investment Information Reuters.com

Stock markets in the US, Europe and Japan are all sitting at multi-year highs. European Central Banks are finally considering raising short rates. Yield curves are still quite positive in Europe. Other countries are faced with the problem that the soaring dollar is dramatically raising the price of oil. Inflation rates in a number of countries has soared to levels not seen in 20 years. Of course, this will prove to be a relatively short lived situation as the FOMC is leading the way to higher rates.

Gold, copper and other metals are likely to turn like oil did a couple of months ago as interest rates tick up. Many folks are mis-reading the inflation situation. Interest rates in America are higher than the inflation rate. There is a real cost to hold gold.

In the past 22 months, the NASDAQ index has increase 6% while the earnings of the NASDAQ companies have gone up 30%. In the same way that Gold and oil will not stay "uncoupled" for an extended period, prices of stocks must move in line with earnings or vice versus. Indications are that earnings growth rates are moderating but they are still going up much faster than prices. A clearing point is at hand.

Technical studies continue to suggest that the market may pull back before making the big break out. However, most investors are well served to avoid trying to play the short term moves. My projection on the S&P from now until 10 years from now is a compounded rate of 11%. Right now, Americans are making a very risky bet by holding more than 5 Trillion Dollars in short term securities. Chances are good that they will under-perform the market.