Right now, there appear to be few “good” options available. As Nixon points out, the devil’s dilemma is that investors are being forced to choose between ensuring the return of their capital and having a return on their capital. Risk aversion today is completely rational – but that doesn’t matter when you’re trying to fight the Fed. Just because you are capitulating doesn’t mean that you are completely powerless; you may have to put your portfolio into risk assets to preserve its purchasing power, but it’s up to you to select which risk assets will pay off.
The part that I put in bold is what scares investors to death—the part about having to choose which assets to invest in. The fear of being wrong paralyzes investors. A wide range of compelling arguments are made constantly about the issues of the day. It can become very easy to feel completely confused about where to invest…unless you have a plan. Relative strength provides a logical framework for allocating assets in a global portfolio. It cuts out all of the conjecture and just systematically reacts to the market with the goal of capitalizing on market trends. Reliance on a logical game plan is essential in order to successfully navigate the global financial markets.
Here is how different investments have done over the past 12 months, 6 months, and month.
1PowerShares DB Gold, 2iShares MSCI Emerging Markets ETF, 3iShares DJ U.S. Real Estate Index, 4iShares S&P Europe 350 Index, 5Green Haven Continuous Commodity Index, 6iBoxx High Yield Corporate Bond Fund, 7JP Morgan Emerging Markets Bond Fund, 8PowerShares DB US Dollar Index, 9iBoxx Investment Grade Corporate Bond Fund, 10PowerShares DB Oil, 11iShares Barclays 20+ Year Treasury Bond