Market Update

Finally, election day is behind us and as we expected Obama has won it. But this morning started with a gloomy European Economic Outlook by Mario Draghi in which he corrected the European growth down and his deficit forecast for France and Spain will be much higher than 3% for 2013 and 2014. He also added that Germany is getting more vulnerable by these developments.

Following these news we have seen a big sell off on the European markets and the Euro going down. Added to the bad news from Draghi we have seen the effects from the Obama win with worries about the fiscal cliff and the debt problems.

When the US markets opened, there was a big sell-off on all levels which nearly went into a panic mode when the Dow Jones, Nasdaq and S&P 500 nearly lost -3% in the early trading hours. At some point the sell-off cooled down and the US markets closed at around -2%.

The US outlook for the next months can be called “difficult” and we suggest to be very careful with investments in US assets. Rating companies Fitch and Moody’s also made comments today that might suggest that we will see further US downgrades at the beginning of 2013.

One of the stocks I would like to put a spotlight on is America’s “sweetheart” Apple (Ticker Symbol: AAPL). Apple is now down -20% since Sep 21st 2012 (around 6 weeks) which isn’t necessary an indicator that Apple is doing bad, but that “big capital” (institutional investors) are turning away from Apple and other tech companies like Google, Microsoft, Yahoo etc.
The big question is where are the institutional investors going to now? Today might have hinted that some capital is still going into the US treasury market with the 10 year note now at 1.632%, but we are starting to see signs that some of the big capital is going into the precious metals market, which in our opinion is the ultimate safe haven.

With commodities also having a good sell-off and especially Oil getting hammered and now at a price of 84.66 (-4.57%), it is very astounding that Gold is at $1718.80/oz (+0.08%) and Silver held steady at $31.85/oz (-0.53%), which shows that precious metals have out performed most of the market today.

Tonight we will have a close eye on China where the Chinese Communist Party Congress is held, which is the most important political event over there and some important decisions will be made.

Also have an eye tomorrow on Europe with the Bank of England and European Central Bank meetings.

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