As discussed in Risk aversion off. Risk now on we may see rallies right into 2010. With Central Bank policies of low interest rates and quantitative easing (money printing) namely the US Federal Reserve. The US dollar is on an absolute downward trend and may rapidly decline into 2010. Of course the flipside and now an accepted consequence of loose monetary policy (re-inflating credit markets with another credit bubble) to reinstate consumption again; is the abundant liquidity for Wall Street which is now causing immense speculation in stock markets. This can be maintained for as long as there is 0% worth on the USD.
In the meantime there are some heads up:
1. A bubble in government bonds, more particularly watching Japan's bond market as the government will issue more debt to fund it's huge deficits into 2010. This will add too supply coming onto the market thus causing yields to rise. In summary Japan may find it very hard to raise equity in the bond markets (as investors sideline on buying goverment bonds). We may see a slumping domino effect in other bond markets as goverments try and raise funds into 2010 and the colossal bubble forming in bonds deflates.
2. The new year 2010 should make the first on the commercial real estate writedowns as banks connected to the commercial mortgage backed security market start to post losses. Listening to reports on the amount of leverage compared to cash is mind boggling from Dubai to London and every other city in the world where investors borrowed big (with little cash) to build commercial property that in all retrospect is just sitting there.
3. With a US dollar going down this of course pushes up commodity prices this will effect food prices namley wheat prices. A real inflationary issue (globally) even if the Federal Reserve deny it, will effect developed counties (as it is now) and more so effecting poorer countries according to a Daily Finance report
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