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U.S. stocks traded sharply lower this week. The Dow was down over 300 points on Friday alone, closing at the lows of the day. The U.S. dollar also lost ground with the dollar index, DXY, off significantly for the week.

Since the financial crisis there has generally been a reverse correlation between U.S. stocks (NYSEARCA:SPY) and the U.S. Dollar. When investors felt nervous they sold stock and went to cash (U.S. Dollars). It appears that is changing.

This indicates that the beginning of a global financial recovery are indeed underway. Money is leaving the safe-haven of the U.S. Dollar and overpriced stocks and finding bargains in other corners of the globe.

It would appear that money is flowing into European stocks, especially in the peripheral countries such as Ireland, Spain and Italy.

Many in the financial community are citing credit concerns in China as the primary catalyst for today's U.S. stock selloff. This may be but I would not look for China to pose any significant threat as the developed countries are getting back on their feet and will likely be consuming more (including more from China).

Gold (NYSEARCA:GLD) is significantly higher on the week. In my view, this is indicative of general anxiety, primarily in smaller U.S. investors. Throughout the financial crisis gold has functioned as a fairly accurate fear indicator, along with the U.S. Dollar. Gold is sending a false signal in this instance, in my view. The U.S. Dollar is showing us that fear levels are relatively low and declining globally.

I would reduce exposure to U.S. stocks and look for opportunities in peripheral Europe. Many stocks there show attractive technical formations, however they should still be regarded as somewhat speculative plays given that European instability is still being felt.

My view is that with rising interest rates, U.S. dividend stocks are particularly vulnerable to further downside. On the buy side, I would look at banks and telecoms in peripheral Europe. Many of them show what appear to be nicely rounded bottoms on a five-year chart. Keep in mind that those European stocks are still on shaky ground as the global recovery starts to take shape.

Disclaimer: Nothing in this article is to be taken as professional financial advice, nor is it a solicitation to buy or sell any type of securities. All financial decisions are your own, seek professional advice before taking action.

Source: Investors Finally Reducing Exposure To U.S. Stocks And The U.S. Dollar