The Global Depression that started in late 2007 had its effect in stock markets during 2008 and then a spectacular rally occurred in 2009. Now it is 2010 and the optimistic analysts who had bet on a recovery and so far proved right are even more optimistic. I defer. I am convinced that all this bear market rally is over and next deluge is on its way. 2010 may be worse than 2008 for almost all asset prices and once again we may see people running toward safe haven - USD. Even gold bugs may find insecticides all over the place!
After a deflating 2008 we had inflation returning at least in developing world which I think has had its run over and will give way to deflation again. We are already seeing so many central banks cutting on excess liquidity and a rise in interest rates is going to be new norm for some time which can reverse only after this new deflation period sets in.
When US imposed stiff tariff on Chinese tyres (Americans spell it tire) I saw that as beginning of new protectionist cult and now respected Paul Krugman advocates 25 percent across the board tariff on all Chinese goods! Looks like Mr. Obama, who is celebrating the success of his coveted Healthcare Bill, will follow his advice sooner. If that happens then all this pseudo recovery that was shown in 2009 will disappear. Protectionism will beat all dancing optimists.
Emerging Markets like India and China will also suffer as still we are in a world where everything is related to each other and no place is immune to global hurricane. Those who talk about decoupling etc will change their tone and words and again look like comedians (as they did during late 2007, when CNBC was full of those analysts speaking about decoupling of India from US)
So far, after the start of Global Depression in late 2007, there was a bear market rally in late 2008 and this has been a dramatic period which once again has reignited that old psychology of 'stocks are always a buy on decline'. This is dangerous. This kind of thinking will only help bears gathering prey for entire summer (bears were in hibernation for one year) and retailers are going to get hurt with wounds that will linger on for a long time.