This rally comes at a time at which stocks seem to be fully priced. A prolonged period of time with low interest rates has inflated equity all around, but has failed to weaken the US Dollar. This means that many of those companies’ investors are throwing their cheap money at, will start seeing a reduction in revenue due to the exchange rate.
Other countries apart from the US will be going through the same phenomenon. Chief among them is Japan. The Yen is considered by many as a great safe haven asset in times of economic uncertainty. The sheer amount of funds buying Yen will negate any stimulus plan that the Bank of Japan can come up with for July. This also threatens to reduce the revenue reports from many of the companies holding the Nikkei index up – Nintendo will be one of the few companies that will probably escape that fate, just because of their spectacular success with Pokémon Go.
This brings the same conclusions back to the fore: markets are ripe for a correction, to put it mildly. The investors who are out there partying, should know when they had enough and pull out before they are pulled under. All of those who chose to stay sober and serve as designated drivers, should have the most to gain in the long term, especially now that safe haven assets might continue taking a hit, while the party rages. It is a great opportunity to think about acquiring those at a discount.
