A Shudder Is Felt

"Excuse me, why have the engines stopped?  I felt a shudder." - Rochelle Rose as Countess of Rothes in Titanic

This week it was evident that there is trouble in global markets.  Now not to discount the fact that the Federal Reserve and other central bankers of the world will rush to support the one beacon of success the stock market, surveying the movements in the markets this week seems to point to a shift in the bullish stance.

The first graph that I look to in these times is our old friend Dr. Copper.  As you can see from the chart below there is a lot of concern about global growth.  China in particular is looking weak and this is feeding into global growth projections and notably the copper price.

Gold also took a tumble recently as concerns for inflation are being replaced with concerns for deflation.  That said I still believe in the value of allocating a portion of your portfolio to this metal as it appears that the gold haters one this round but the long run bull market for gold is still intact.

Deflation is being fueled by the Bank of Japan's massive quantitative easing program as their disdain for their currency is giving them the ability to undercut their rivals and hence export their deflation to the world.  This in turn is fueling their stock market which too is spiralling higher, but the repercussions of Japan's move will be felt throughout the globe and will not have a pleasant impact on their trade partners.  As an example expect Toyota to take market share from the resurgent US automaker as they will be able to under cut their their American competitors.

All of this news and some poor earnings from the some of the US bell weather stocks is having an impact on the performance of the stock market.  As I mentioned before though the Federal Reserve will put in a big effort to support this market as it is the shining beacon of its success. 

So whether this is just a brief pullback or the start of something bigger the global metrics continue to point to weakness and this will fuel a large pullback at some point in the near future.  I believe though that when that time comes, much like the Titanic, there will be little time to exit so make sure you heed the warnings early.