Risk appetite is back big time. The JPM Non Investment Grade Index fell to 590. The last time it fell this low was back in Jan 2008. If the risk appetite measure works, the MSCI World Indexd could rise between 15 - 20% very soon! For emerging market indices, the rise could be betwee 30 - 60%!
Let's wait and see what happens. I'm piling on my risk trades and some of you have followed suit. Good on you. In summary:
Equities: time to pile on to emerging market and Asia ex Japan stocks. Increase your asset allocation to 75% from 60%.
Bonds: lighten up on emerging market and Asian bonds to 10%. Stick to preferred shares, convertible bonds, never ever into investment grade, long-dated bonds.
Alternatives: Load up on gold because inflation is going to rise in 2011 and the west is going to print money. Load up on oil on consumption recovery next year. Buy industrial metals because of infrastructure investments in BRIC. Buy agricultural commodities due to changing weather and population growth.
Volatility funds is a hold. We will slowly add more as the stock market rises.
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