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Global strength in equities- but question marks ahead

1st April 2012 S&P 500

As we enter a holiday shortened week most market participants are feeling good about the situation. The jobs report on Friday is the most important peice of information investors are interested in scrutinizing. Richopedia does not expect trouble to be imminent. In fact we are expecting some additional strength in the near term. We do see a sell-off, but a little bit further down the road. We wouldn´t be surprised to see a market pullback beginning in the early part of May, but we don´t think it´s going to be a big move, just enough to create a stir and destroy the false sense of security we have grown accustomed to lately.

There is plenty to worry about, for those of you who are macro buffs. The US economy is making some headway, but the underlying condition is still dire. There is simply too much debt, and too little being done about it. The situation in Europe looks equally troublesome in the longer-term. While the LTRO 2.0 might have offset the inevitable and once again saved the day, printing money is a short-term solution to a longer-term problem. The structural defficiencies of the European Union have not changed, the underlying problems remain unaltered and it is only a a matter of time before they rise to the surface once again. On top of all this the Asian situation is not as jolly as it might look at a first glance. Japan in particular remains an accident waiting to happen.

We are not as bearish as we might seem. At the moment we are expecting some additional strength in global equities. Down the road we are expecting a sell-off, and we wouldn´t be surprised to see such a sell-off materialize during the first half of May. As for now we are expecting a dull and low volume week ahead of the holidays.

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