Market Outlook June 6, 2011

Last week, I put my money where my mouth is and bought the gold ETF. This week, gold (IGT) continues to present better momentum than the other asset classes. This coincides well with a market correction, since gold has risen while stocks have fallen. If you are thinking of hedging your portfolio against stock market volatility, gold appears very attractive for this week.

If you are looking only at stocks, bonds and cash, stocks still appear to have a slight advantage. This implies that a major correction doesn’t appear likely yet. At the same time, it’s looking more probable. The market adage “sell in May and go away” is starting to sound very reasonable again for this year, much as it was last year.

Earnings reports seem fine, but the economic outlook is suddenly uncertain again. As the stock market valuation drops, it becomes more attractive. But picking the bottom is extremely difficult. At least if you’re investing regularly, you aren’t likely to be overpaying this week.