Mon 3/19/12 3:52 PM – Stocks, Oil, Gold Up, High Quality Bonds Down Again

Just before the close of trading, the S&P 500 index, the Nasdaq and the small stock indexes are pulling back from mid-day highs. Still, they should finish up on the day.

Gold and oil are also up, 0.14% and 0.7% respectively. The dollar is sharly lower today.

The short-term trend in gold is lower so this may just be a tiny bump up. It seems that gold is becoming a source of funds for stocks, especially since Ben Bernanke hinted last week that adding more liquidity to the economy via the Federal Reserve buying bonds is not on the table right now. Liquidity injections are good for gold because of gold’s reputation as an inflation hedge and liquidity injections on the scale the Fed has been doing tend to stoke inflation fears. Inflation hawks are not so worried lately so gold is lower. If it dropped another 10%, which it may do, I would most likely be a buyer.

Treasury bonds and high quality corporate and municipal bonds are down again today after a rough week last week. Is the party over for bonds after a 30-year bull market that started all the way back in 1982? Yes, probably as long as U.S. economic news stays neutral or upbeat. It may be time to talk about switching some bond money to other places in the bond universe or to other sources of income and stability.