A Post-Election Bet on Growth
With the election out of the way, the markets worry about Europe, Chinese elections, and the US fiscal cliff...but in the end, the underlying bet is on growth, notes Stephen Leeb of Leeb Income Performance.
The market’s initial reaction to President Obama’s reelection has been to shun everything related to growth, as evidenced by the large declines in oil, copper, and other basic commodities, as well as stocks.
The market has put its chips instead on the only path to stimulating growth that it sees as happening. It’s betting on further easing by central banks, especially in the United States and Europe, and even in Japan.
The evidence, of course, comes from the dramatic outperformance of gold. What strikes us as most meaningful isn’t just that gold has held last week's large advance—it’s that, unlike in previous times when gold has been strong, this time around gold stocks have dramatically outperformed other stocks.
And while it’s far too soon to declare a new leg for the bull market in gold, this kind of action—in which gold and gold stocks shine together, in contrast to the action in other commodities and especially apart from stocks—is what you’d expect in a bull market for gold. Thus, one immediate recommendation in the wake of Obama’s victory is to continue to have at least part of your portfolio invested in gold and gold stocks.
It’s far too soon to make any really heroic long-term projections. We understand the flight to gold, which is a strong bet on further monetary easing.