Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Tesla Robo Taxis are Coming THIS YEAR! - 16th June 24
Will NVDA Crash the Market? - 16th June 24
Inflation Is Dead! Or Is It? - 16th June 24
Investors Are Forever Blowing Bubbles - 16th June 24
Stock Market Investor Sentiment - 8th June 24
S&P 494 Stocks Then & Now - 8th June 24
As Stocks Bears Begin To Hibernate, It's Now Time To Worry About A Bear Market - 8th June 24
Gold, Silver and Crypto | How Charts Look Before US Dollar Meltdown - 8th June 24
Gold & Silver Get Slammed on Positive Economic Reports - 8th June 24
Gold Summer Doldrums - 8th June 24
S&P USD Correction - 7th June 24
Israel's Smoke and Mirrors Fake War on Gaza - 7th June 24
US Banking Crisis 2024 That No One Is Paying Attention To - 7th June 24
The Fed Leads and the Market Follows? It's a Big Fat MYTH - 7th June 24
How Much Gold Is There In the World? - 7th June 24
Is There a Financial Crisis Bubbling Under the Surface? - 7th June 24
Bitcoin Trend Forecast, Crypto's Exit Strategy - 31st May 24
Zimbabwe Officials Already Looking to Inflate New Gold-Backed Currency - 31st May 24
India Silver Imports Have Already Topped 2023 Total - 31st May 24
Gold Has Done Its Job – Isn’t That Enough? - 31st May 24
Gold Stocks Catching Up - 31st May 24
Time to take the RED Pill - 28th May 24
US Economy Slowing Slipping into Recession, But Not There Yet - 28th May 24
Gold vs. Silver – Very Important Medium-term Signal - 28th May 24
Is Gold Price Heading to $2,275 - 2,280? - 28th May 24
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

U.S. Economy Muddling Through, More Crises, More Global Risk Aversion Ahead

Interest-Rates / Global Debt Crisis Dec 19, 2010 - 06:40 AM GMT

By: Bryan_Rich


Best Financial Markets Analysis ArticleFor the better part of 2009 and for the second half of 2010, the world’s focus has been on how dreadful things look in the U.S. and how great the opportunities are said to be everywhere else.

But despite all of the anti-dollar and anti-U.S. policy sentiment that has proliferated around the world, apparently the financial markets haven’t felt the same way!

In fact, heading into the final two weeks of the 2010, U.S. assets have been a harbinger of investment performance.

Longer term the story is the same …

Year-to-date, the dollar index is up 3 percent. Ten-year Treasuries have gained 4.3 percent. And the S&P 500 is up more than 11 percent.

Meanwhile, investors lost 1.9 percent in Brazilian stocks … lost 2.2 percent in Japanese stocks … and lost 11.6 percent in the Chinese stock market index.

Among global currencies, the dollar has held its own, performing right in the middle of more than 70 global currencies in 2010, and in positive territory against a basket of major currencies.

Going into 2011, the outlook for next year continues to argue for U.S. assets outperforming those of several other major markets.

Take a look at the GDP estimates for 2011 in the table below …

While global growth is sluggish and the outlook for meaningful improvements looks bleak, in a world with few options, muddling along doesn’t look so bad. And the U.S. is doing just that, due in large part from the aggressive stimulus policies.

But Will It Continue?

There has been a lot of focus on the sharp rise in U.S. interest rates during recent weeks. And the media’s explanation of this activity has included two opposing viewpoints that portend two diverging outlooks for the U.S. economy:

The argument for a better economic outlook—

The improving U.S. economic data, combined with the stimulative monetary and fiscal stance, will lead to better U.S. growth than what has been anticipated. Therefore rates are rising in view of a strong 2011!

The argument for a gloomy economic outlook—

Given the aggressive monetary and fiscal stance in the U.S., the bond markets here are beginning to take the punishment — ultimately driving rates higher and higher, just like in Europe’s weak countries.

We’ll likely find that neither of those arguments is valid.

Take a look at this chart of 10-year government bond rates that include the U.S., euro zone, Japan and the U.K. You can clearly see this is not only a move in U.S. government interest rates, it’s a global rate surge.

The fact is, big investors have been riding the government bond markets’ returns for the better part of the year. And the recent aggressive rise in rates has all of the trappings for when these same investors book their profits into the year-end, pushing bond prices down and yields up.

In a global economic environment defined by deleveraging and depressed global demand for the foreseeable future, rates are in a historically low range. And I believe they’ll likely continue to oscillate in that range until the outlook for a sustainable recovery arrives.

And don’t expect that to come anytime soon. Already Bill Gross, the world’s biggest bond fund manager is said to be accumulating bonds at the current levels, looking for another retreat in rates.

So runaway interest rates probably won’t be the story for 2011, but here’s what you’ll likely see …

More Crises, More Global Risk Aversion

The evidence is growing in Europe that this current act of government rescue isn’t working. This week Moody’s cut Ireland’s credit rating five notches. Plus it put Greece and Spain on review for a downgrade.

Now the one left holding a growing bag of sour sovereign debt in those three, as well as in the other weak euro countries, is the European Central Bank (ECB). And the ECB is publicly showing concern about taking a haircut on such “investments” … something European officials have sworn wouldn’t happen.

The latest crisis has once again put the euro's survival at risk.
The latest crisis has once again put the euro’s survival at risk.

So the euro crisis is nearing a tipping point. A point, which if passed, could send global financial markets into chaos again.

The other area of bubbling threat to the global economy and global risk appetite is China, the world’s most-loved growth story. It’s facing a choice of slower (recession-like) growth or troublesome inflation. Given the public unrest that could result from either, the Chinese government is dragging its feet.

And that may result in an even harder landing for the Chinese economy plus a big disappointment for global investors who were counting on China to lead global growth.

Considering all the talk about sovereign debt defaults and emerging market bubbles, I expect global investors to hold their fingers on the exit buttons for investments in risky assets around the world.

So don’t be surprised if we see another global flight to safety in 2011, just like we saw in 2008.



P.S. With these risks evolving, it’s important for investors to be plugged into the changing global landscape. And there’s no better way than by following global currencies. Where there’s always a bull market … no matter what’s happening in other markets. And where the investments can give you up to NINE times more interest income than ordinary CDs!

I’ve prepared a special presentation to help you do that. Just click here to begin.

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit

© 2005-2022 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in