Forget everything you've read in this space for the last few weeks. That's more or less the message from Joseph Tanious, Market Strategist from JP Morgan.
Tanious regards gold as being driven purely by speculators, suggesting the glittery apple of traders' eyes has become a bubble, driven largely by retail dollars. He notes that "when you have ads with MC Hammer holding a gold hammer" it's time to consider the possibility of a bubble (author's note: Gold is 38% higher since Ed McMahon's death in 2009).
While I let that sink in to the craw of our resident gold bugs I'll note that Tanious also thinks the greenback is going lower. Gold and the dollar shrinking simultaneously would break a traditional relationship, but a weaker dollar would support Tanious' prediction for a market rally in the back half of this year.
His thinking? Earnings are going to beat estimates for an 8th consecutive quarter, fueling stock gains. What's more corporations are going to put their cash to work by hiring workers. He's not talking about 4% growth or anything but, with stocks cheap on a P\E basis and expectations relatively low, the market strategist is expecting a second-half recovery almost entirely at odds with what Nesto, Bernanke, and I have been talking about for a few weeks.
Which side are you on? Drop us a comment or email us at BreakoutCrew@yahoo.com.