US Feds will start to announce the size of QE2 where they will inject more money into the economy through purchase of treasuries and bonds. This does nothing for creating jobs but it will provide more liquidity into the market, pushing up asset prices as people move to riskier assets. This will avert deflation and increase long term inflation.
Better use of money would have been investing in renewal energy like wind and solar, but that's my personal opinion.
So with interest rates at all time lows, we have inflationary pressures via monetary policies, negative sentiment amongst the regular population, large cash positions being held by corporations and high net worth individuals ........ all this points to a potential rally in the stock market.
We are also entering the period where historical Santa Claus rally occurs. There is also the saying of buy when it snows, sell when it goes. So if we believe that the herd will do that and some people in the herd will try to jump the gun, we expect to see a bullish market starting in November and going until March/April of 2011. Traditionally people sell in May and go away for the summer, but again, anticipating the herd to do that, you should get out in March/April just after RRSP season (which should be healthy as risk tolerance returns due to the abovementioned monetary policies).
my current strategy is
1. stay away from bonds, real estate
2. stay heavily invested in commodities (oil, gold, copper) - play the asset inflation, currency devaluation and economic boom in Asia
3. move into USD stocks as US dollar devalues - this will bode well for US stocks (multi-national)
4. writing both out of money puts (on stocks I like but do not want to pick up right now - RIM, MFC, G, RY) and out of money calls (on my holdings - TD, IVN, COS, SU) - this works real well for a gradually increasing market.
5. or just stay with ETF's or index funds and ride the market until April.
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