Signs May be Positive, Though We are still in a Bear Market Rally

As we near the end of the year, many investors are breathing a sigh of relief after licking their wounds of 2008. I would have estimated the the financial markets to have a significant correction in 2009 after the March lows. Whether you believe the rally in equity prices is for real or not it, does not change the fact that investors confidence in 2010 in is question.

Markets Strategists and Global Economists are at polar opposite ends of the spectrum when predicting the directions of the global economy and the financial markets over the next couple of years. So who is right? Neither. Remember the financial markets perform badly when the investing public cannot foresee what is on the horizon. Currently, every bit of poor economic data that is reported is for the most part taken with a grain of salt, as EXPECTED. The current environment is discounting bad news and buying good news. With the massive amounts of liquidity in the market, and a lack of selling within the financial markets could move the markets higher on a shear investor's complacency.

We remain in the camp that the financial markets have extended themselves too far too fast since the March lows. Though, investor's sentiment is overwhelmingly positive regardless of the current global economic environment. Therefore, we feel investing in this market over the sort-run could prove profitable in several different asset classes, but derivative protection is an absolute necessity because of global economic uncertainties.