As for commodities Caton shows a graph (left) which pictures a serious upward spike in real base metal prices. However the same graph shows that historically these spikes have steep and fast falls too.He says last year international markets had a good run and it is “unrealistic” to believe that it will continue. Caton says people should stay invested and “eke out modest gains.”
The main concern is the United States market, where economists are predicting a soft landing for the economy.
However, Caton says that history shows us that often when a soft landing is predicted in the US, a hard landing eventuates.
Caton has always been bullish on the Asian markets and he remains so. His contention continues to be that these countries will continue to grow strongly.
Investors should get good returns in Asia, but they come at a higher risk level than in other markets.
As for commodities Caton shows a graph (left) which pictures a serious upward spike in real base metal prices. However the same graph shows that historically these spikes have steep and fast falls too.
Does this mean the same will happen this time around? Caton says there is an expectation that they will come down at some stage, but he does suggest “the world has changed” when it comes to commodities.
One reason is the high demand levels from China and India, and the other that the resources are more tightly controlled than before.
He thinks there is a risk here, but says “I’m not sure it is a 2007 risk.”
In Australia, where there is a large resource sector, the “sector is priced for a fall.”
Caton says that this is a good year to sit back, to stay invested. He repeats his word of warning, that while sitting back keep one eye on the United States market.
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