Tuesday, October 30, 2007

Seven Themes I'm Tracking in the Stock Market

1. Outperformance of Asia, especially the impact of China's investors on Hong Kong;

2. Scarcity of water resources world wide and need for infrastructure development;

3. Within the U.S., outperformance of large cap issues relative to small cap;

4. Housing and banks as weak sectors in the U.S., with spillover to consumer discretionary areas, including some retail;

5. Weak dollar themes, including strong oil/energy, gold, and raw materials;

6. Growth among emerging economies, leading to increased demand for foodstuffs and inflation among agricultural commodities and related products;

7. A structural shift toward increased volatility among financial markets following historic low volatility, with heightened correlation of returns among asset classes during alternating periods of (liquidity/illiquidity-driven) risk seeking and risk aversion.