Obama looks like he will win by a comfortable margin and the market seems to be rallying on this news. We really haven’t seen much in the way of positive economic data to justify the rally over the last week. Whatever forces were exuding influence on the market pre-election will have a different posture post-election, regardless of the outcome. Here is how I think the next few weeks and months will turn out.
1) The recent market really will fizzle a few days after the country is finished celebrating Obama’s victory. 10,000 Dow may be a tough ceiling to push through and the 8,000 level will be tested again before the end of the year and probably before the end of November. The PPT has left the building.
2) The dollar rally will also lose steam and the greenback will plunge back to 80, find temporary support, and then continue to decline all the way back towards 70 or lower into 2009.
3) Gold and silver will regain their luster and safe haven status. A rush out of equities and declining dollar may ignite the massive 3rd upleg that so many goldbugs have been waiting for. This will propel gold towards $1,000 by the end of the year and to new highs above $1,200 during the first quarter of 2009.
4) Food will be the next oil. This is a commodity with demand that does not slow even if the economy does. Food prices will begin to push much higher over the next few months and into 2009.
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