Conditioned to Buy Dips

Dip buying has been very rewarding since the dinosaurs roamed the world.  Or at least it seems that way.  We are getting discouraging signs of global growth again this May, like last May.  But there is a difference.  Back then, we still had a lot of pent up demand from the 2008-2009 recession but much of that has been used up.  Same goes for fiscal stimulus.  Also there were better valuations back then.

Going forward, I don't think dip buying will be so rewarding.  We have reached levels on stocks and commodities which make incremental gains that much tougher without further money printing.  And I doubt we see QE3 unless the S&P at least shows more weakness first.  Yes, the Bernanke put is still there but he's going to put it to work on big dips, not small ones.

The message that we are getting from the emerging markets stock indices paint a different picture than that of global growth that many are forecasting for the region.  China has been badly lagging the US.  Many still believe in the commodity bull market and it is a compelling story, but it hinges on emerging markets growth, especially China.  Their stock market is telling a different tale than portfolio managers.