Global markets have been on a rise for past weeks even after two disappointments from US Fed and ECB on stimulus last week. Fundamentally, nothing has changed in the event of global economy, EU still in the debt issue with Greece, Italy and Spain still struggling and US growth still stalling, unemployment still high. As such, global stock markets are a bit on the over stretch based on fundamental. Moreover, earning season is coming to an end in another 1 or 2 weeks time and after that there isn't much catalysts to propel the stock markets further. Also, there is always this stock market goes sideway in consolidation mode ( or range bound ) after every earning season.
There is lot of talks on US and Europe going into stimulus program in September and that one of the reason that fuel the current rally in global stock markets. Firstly, US Fed has not changed its stance on the stimulus ( ready to act if required ) which it stated months ago. Secondly, the primary role of ECB does not warrant it to anyhow roll out stimulus either. As can be seen from the recent news that any bond buying program ECB will have to get approval from the EU leaders. The new EU bailout fund if no issue should commence operating in September and that could be one possibility of activating that to purchase Spanish and Italian bonds. One need to note that problem in EU now is Growth vs Austerity and that could only be solved or given a solution by the EU political decision. Bond buying can lower the borrowing cost for Spain and Italy but that is only short-term solution. The main focus should still be EU leaders ability to implement measures to stimulate growth and at the same time maintain austerity to cut debt level. Markets could be over optimistic towards September in hoping for stimulus but that still cannot solve the issues face by US and EU.
As a whole, the stance of cautiously optimistic and not overly optimistic or pessimistic remain status quo. There is another issue investors must bare in mind that could send global markets down for a correction again from October onwards and that is the US debt ceiling issue. The deficit reduction panel from US failed to come out concrete plans last year and if they still fail to do so in few months time, the auto spending cut mechanism will kick in next January and that could further hinder US to stimulate growth.
For short-term investors, do cautious now as earning season will be over soon, the global events will return as focus and markets could be volatile again. Long-term investors if still holding from purchase in 2009 - 2010 can continue to hold. Those who purchase during October 2011 or June 2012 if feel uncomfortable might want to consider sell off half of it first. One need to know that global interest rate is on the low now. Putting money in banks to get peanut interest rate practically destroys the value of money. Might want to consider investing in high-yield stocks ( these stocks like S-Reit and defensive blue chips have been hitting new 52-weeks high lately ) to get some return from the dividend. Wait for pull back for these stocks to buy into.
Personally, I have a view that there should be another dip probably bottom in December and then rebound to signal the last leg of the bull market which started in 2009. Music could be stopped in 2014 before another bubbles burst ( tech, bond, etc ) and sending global economy into recession again. Hence, those still feel uncomfortable might want to invest 50% of your cash in high-yield stocks and hold back the rest of the cash wait for next recession then go in.
