When it comes to diversifying and optimizing your investment portfolio, you probably wonder which assets are more reliable and profitable than others? Bank deposits, ETFs, stocks, commodities, S&P500?
Let’s try to find out the truth together.
Global Stock Indexes: Q1 2012. Changes
First of all, let’s have a look at those changes that took place in global exchanges during the 1st quarter of 2012.
Since the beginning of 2012, major stock indexes have been showing positive dynamics. The chart below shows that in Q1 2012 Dow Jones gained 6,47%, NASDAQ Composite - 17,55%, S&P 500 –10,67%, Hang Seng 10,14%, FTSE 100 - 2,43%:
As we can see, the deviation value varies from 2% to 17%. FTSE 100 showed the lowest growth due to the eurozone crisis. Investors were extremely cautious when investing in the eurozone economy.
At the same time, Warren Buffet’s investment holding called Berkshire Hathaway invested over 1.4 billion euro in European stocks in late 2011.
Therefore, the eurozone crisis provoked a short-term flight of capital (mainly by portfolio investors and common speculators). Long-term investors didn’t want to quit. They still hope for an economic improvement in Europe, Forex Trend experts report (Forex Trend belongs to the TOP 10 of ’s rating of Forex brokers ).
Now, let’s have a look at NASDAQ. It has gained 17% over the last 3 months. This suggests that the global technological development is going on, thus allowing innovation companies to increase their capitalization.
What Affected Global Markets In Early 2012?
The following factors improved the situation:
· Higher pace of the US economic recovery
· Agreement to provide another tranche to Greece
· Implementation of the eurozone’s 3-year LTRO
· Fed Reserve’s easy monetary policy
· Higher oil prices
The following factors worsened the situation:
· Greece got too close to default.
Which Industries Were Beneficial For Investors In Early 2012?
Crude oil. In early 2012, investors got an opportunity to profit: the price of Brent oil gained 15%, WTI did the same. There were several factors influencing oil prices, including the USA’s policies against Iran.
However, not so long ago, it became clear that higher oil prices started affecting the trading volume in the global oil market. Since then, the price growth has been considered a negative factor affecting the global economy. There are efforts to drop the prices. In particular, for several months, China has been periodically reporting about negative tendencies in the national economy. Analysts anticipate a further drop in oil prices in the short run.
The market of non-precious metals. After the global economic situation started deteriorating in mid 2011, industrial metals reached the price bottom. In particular, aluminum depreciated down to the 18-month low amid production concerns and economic uncertainty. At this point, when the reserves of these metals are running low, experts anticipate higher prices.
Gold. Gold prices have been periodically growing over the last 10 years. In August 2011, gold prices reached the top at $ 1875,25/oz and then rebounded. In early 2012, gold prices started gradually growing again. In late February 2012, the price hit $1781/oz and rebounded again. Gold became volatile mainly due to the US Dollar and those investors who consider it to be a safe haven asset amid the global economic uncertainty.
FOREX. In early January 2012, almost all the currency indexes (except the index of the GBPCHF cross pair), dropped, which was a natural outcome if to consider the situation seen in 2011. In mid January, most of the indexes started growing.
As for Forex trading, PAMM (stands for Percent Allocation Management Module) accounts are worth special attention. PAMM accounts are special trading accounts managed by professional traders. Therefore, investors can invest in PAMM accounts to let those traders manage their capital for them. In this case, investors need no trading skills. PAMM accounts imply a certain set of obligations for their managers (traders), including the max drawdown. If the worst scenario takes place – i.e. the drawdown limit is reached – trading is automatically suspended, thus allowing investors to withdraw their funds. In this aspect, PAMM accounts look more attractive and reliable than the “old school” trust management, when investors trust managers (traders) with their money directly, without any guarantor.
Forex Trend has revolutionized the PAMM industry by introducing a unique service - PAMM indexes. Unlike conventional PAMM accounts, where a single trader manages one or several accounts, a PAMM index allows investors to secure their capital against losses by choosing several PAMM accounts managed by successful traders and combining them into an index. Therefore, you diversify your portfolio and reduce the potential risk of losing your money, as there is almost zero chance that all the traders (with different trading strategies and approaches) will lose at the same time. Usually, even if one or two traders suffer losses, the others make up for the losses, thus making the index profitable anyway.
Near-Term Market Outlook.
Despite all the efforts to curb oil prices, the current economic situation around the globe suggests that the prices may only be cut artificially, down to a certain level and for a limited time period. Just take into account the lack of oil in Europe due to the fact that European countries stopped importing oil from Iran. Libya’s oil industry is still far from being restored. There are other factors, like the eurozone crisis and the forthcoming presidential elections in the USA. Most likely, oil prices will be fluctuating within a price range for several months. If the mentioned problems are not resolved by late 2012, oil prices may rocket sky high after the presidential elections.
The destiny of the US Dollar is unknown as well. The best scenario is a narrow-range movement. There are grounds for that, if to consider the relative stabilization of the US economy. This will also influence the global prices on gold and other precious metals.
Market Leader and would appreciate if you could participate in a survey. Please, visit the Academy’s forum for traders and investors and answer the following question:
What is your near-term market outlook?
