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Medium-term outlook 20th December 2011

My views on asset classes and how I see today's environment:
1) The Eurozone and most probably the UK are facing a recession - at least Southern Eurozone and France because of austerityPositions in Eurozone equities should be established only on weakness and try to unload rallies on 'summits' etcEurozone equities have already been driven lower however so they can be bought on weakness - especially for dollar-based investors.
2) The US - equity and bond markethas benefited disproportionately from its 'safe-haven' statusThe economic indicators have not been bad recently, granted, but it remains to be seen whether the US economy can be shielded from a global slowdown.  Again, a sell on strength and buy on weakness trading approach is warranted for equitiesFiscal issues and some possible austerity could come to the United States and cause a slowdown and equity market sell-off.
3) High quality government bonds are very expensive and will continue to be expensiveIf and when the economic environment improves and interest rates start heading backit will provide a golden opportunity to shortIn the meantime, short-term, investment grade corporate bonds appear to make sense.
4) Precious metals: the recent sell-off (gold sub-1600 and silver sub-30) provides with interesting buying opportunitiesThe environment has not really changed, interest rates have not risen and central banks are still providing plenty of liquidityA portfolio of risk assets and precious metals could provide some measure of safety - unless we fall into a deflationary depression which would kill both assetsCentral banks will do their utmost to avoid that scenario howeverWhat to do though if precious metals start falling precipitously - especially as they don't produce incomeThis scenario in my opinion if interest rates start to rise (a la Volcker in 1980s)
5) Currenciesno strong opinions, euro should be sold on strength and care should be taken not to be taken hostage in any euro break-up exercise (unlikely but not impossible).  Diversify and actively manage euro exposure.
6On Europe: the market seems to be assuming that the ECB will at some point be forced to step inThis is not so clear to me howeverWhy haven't they already stepped in for example?  It's not like the crisis so far has been a picnic.  
7) Are dividend stocks the new bubbleThe Dow Jones Industrials is selling with around a 2,44% dividend yield (DIA) and s & p with a dividend yield of 1,93% (SPY).  A switch out of DIA and into SPY could be a helpful idea in a correction, especially since DIA has attracted a lot of dividend investors and has outperformed SPY greatly in 2011.