Its a new year forget the old! After the nerve-wracking year weve just had,
investors seem entitled to a little therapeutic amnesia. In that light,
yesterdays brisk rally in global stock markets (including a 180-point surge for
the Dow) makes perfect sense. As usual, there was some cheery news to justify
the buying. Two purchasing managers surveys overseas, released Monday, showed a
return to growth in Chinas manufacturing sector and a smaller contraction in
Germanys. Then, Tuesday morning, the Institute for Supply Management issued its
monthly report on U.S. manufacturing. According to the purchasing execs polled,
the nations factories revved up a bit in December, with the ISM index climbing
to 53.9 a six-month high. A reading over 50 indicates expansion, so the ISM
report is clearly a favorable near-term omen for the U.S. economy. On the other
hand, as the chart here illustrates, the ISM remains well below the 60-plus
levels it achieved in 2010 and 2011. Thus, its still likely that the next few
months will bring, at best, moderate growth no recession, but no boom either.
Stocks can rise somewhat further in this climate, probably to the 1300 area on
the S&P, or slightly higher. However, I advise you to exercise the utmost
discipline with new purchases. Dont chase stocks that have jumped sharply in
recent days. Take Barrick Gold (NYSE: ABX ), for example. Since last Wednesdays
intraday low, the shares have gained 8%. While ABX is still below my official
buy limit of $48, I think investors can catch the stock at $47 or a tad lower
sometime in the next week or so. My strategy is to be patient and then pounce.
Also, Im no longer considering a possible sale of ABX in the mid-$50s. It looks
as if gold has formed an important low in the past few weeks. If so, prices for
gold-related assets, such as mining shares, may be headed substantially higher
in 2012. So, I dont want to sell ABX too soon. If youre looking to put idle cash
to work right now, I suggest bonds, particularly emerging-markets debt. iShares
J.P. Morgan U.S. Dollar Emerging Markets Bond Fund ETF (NYSE: EMB ) invests
exclusively in government debt, which tends to be safer than corporate IOUs.
Moreover, EMB follows an intelligent asset-allocation strategy that
automatically skews the funds portfolio toward better-quality issuers. Current
yield:
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