The world and markets are in a transition to a new status. Who remembers, if they knew of, Francis Fukuyama's 1992 book, The End of History and The Last Man? It was written while the Soviet Union was imploding. Fukuyama's notion was that the Great Liberal State, envisioned by G. W. F. Hegel in 1806, after the French Revolution and during the Napoleonic Empire and Wars, was finally fully in charge everywhere in 1990 allowing freedom and honest government. Communist and Fascist revolutions and final defeats left the world "free at last".
What was called the Peace Dividend in the 1990's, as the costs of defense were seemingly justified to be cut, got quickly spent and a lot more as well by the advanced nations. And so we now find the world overspent and massively over indebted. We find our freedoms being trampled upon by the Great Liberal Governments in their desire to control nearly every facet of our lives in order to make things "work right" and to enable them to collect taxes on everything.
This is where we are, and every political party everywhere supports the plan. However, people, who, after all, create the economy and markets, are not following the script very well. So we must invest in different ways to survive and hopefully prosper while governments use every crisis to increase their power. This isn't a call to arms, rather a call to brain power.
After a huge rebound from the summer lows, stocks are looking toppy again. It's a selective rally as many indexes have remained quite a bit off their 2015 highs. Forty four percent of all publicly traded stocks in the U.S. are as said to be down at least 10 percent year-to-date and 39 percent are down more than 15 percent year to date.
I suspect the stocks, sovereign bond, forex, and gold markets are in somewhat the same position as in 2000.
The interrelationships of markets since 1980 are instructive. Interest rates and gold topped out, the dollar bottomed, and stocks the dollar rose from 1980 to 1985 when gold fell under $300 and the dollar was over 160. As the dollar fell from 1985, all else rose until the 1987 crash which led to a wide consolidation band in all assets into 1994. Then the great moderation as the dollar made another bull run into 2000 along with stocks and bonds and gold ground its way back down to under 300 and then 250.
Bonds, stocks, and dollar have made another run since 2010-11 while gold and commodities have crashed. I think reversals are close at hand. What is up will go down, and what is down will go up.
I am lightly net short in stocks but long intermediate term VIX's (VXZ). I am still long US Treasurys but am anticipating a final run up there and converting to TBills and short term TIPs. I am just starting to buy gold and silver (CEF and physicals) and selected oil and gas stocks (mostly US trusts) and commodity funds (RJI and GCC).