Looking at the Bigger Picture

The second part of this morning's report is once again touching on our big picture view that equities will experience a poor 2016 /7 led by the US. The reality this time is around QE and low interest rates that have pumped up asset prices. Basically, the system has been flooded with money which, not surprisingly, has been the major contributor to the increases in asset prices. Either this QE will stop shortly, perhaps after a last hurrah this Thursday by Europe, or economies will continue to struggle with confidence ultimately being lost in the Central Banks - both bad for equities. Short term, we have a preference that equities in the US will make fresh all-time highs BUT we are more confident that the S&P500 will be ~1500-1600 in the next 12 months i.e. +20% lower. - see Chart 3 below. Hence, Market Matters intention is to continue increasing its cash position over coming weeks / months. Our full report reviews our strategy on FMG (VIEW LINK)