Dangerous days for investors

Global stock markets have become listless. One also reads about slumping High Street sales in the UK and then the apparent strength of the FTSE. If ever there was a logical disconnection this is it. UK consumer spending drives the UK economy, and if it is in trouble so is the FTSE.

In the UK the downturn in the grossly overvalued housing market is beginning to result in more cautious spending patterns, partly due to a slump in re-financing activity.

Many commentators think that the giant US economy is just slightly behind the UK in this curve, and that the present US housing bubble is all that is keeping its consumers spending. Even Fed Chairman Alan Greenspan has acknowledged the existance of 'housing bubbles'.

Now if and when the US housing bubble bursts - and that might follow another upward shift in interest rates - then Wall Street will be in trouble.

This all comes down to the positioning of business cycles in relation to capital markets. A long period of economic expansion in the UK and US has been compounded by a long period of low interest rates and the requirements of the election cycle.

What goes up must come down, and this is the point reached today. It may not be until the summer is over that reality is reflected in capital markets, and that they will drift until then.

However, you could do worse the selling now and buying bonds or precious metals, or both. For if capital markets go awry interest rates will fall and bonds rise and precious metals become a safe haven. And real estate will definitely not be the place to have investment capital in such a market, except possibly in the Middle East where inward investment is booming.