So what is this popular investment approach?
You've heard the answer before: Diversification.
You probably know that the purpose of diversification is to spread risk across asset classes. The assumption is that if one asset goes down, the others will be stable or perhaps even move up.
But what if we're in a time when an "all the same market" scenario is unfolding in the financial world? What if the following description proves accurate:
"In recent years the financial markets have turned roughly together. Although to date they have not topped and bottomed on precisely the same day or even the same month (that would be too easy), their correspondence is getting tighter and tighter."
Elliott Wave Theorist, May 2011
Please take a look at the chart below.
As noted in the quote above, not all financial markets are trending together exactly. Yet the chart speaks for itself: the correlation is becoming increasingly visible.
In the stocks category alone, diversifying between sectors can leave your portfolio beaten and tattered:
"More than ever on record, individual stocks in the Standard & Poor's 500 Index are moving in unison...
"'It's not just stocks. It's actually all asset classes,' said [Andrew] Lo, who is...the chairman and chief investment strategist of a hedge fund. 'The U.S. dollar relative to other currencies, gold, oil and hedge fund returns have now all become very highly correlated.'"
Huffingtonpost, (8/24)
These asset-class correlations are no surprise to EWI's subscribers. You see, we first postulated our "all-the-same-market" scenario in 2002.
How do we see the "correlation scenario" unfolding in stocks, gold, silver, oil and other markets in the weeks and months ahead? The new
Elliott Wave Financial Forecast updates you on our "all-the-same-market" analysis.
Plus, you get an important clue to the stock market's "ultimate destination" by reading our analysis of the trading figures for the OTC Bulletin Board, and how they correlate with the EWI Equity Culture Index.