It is a bullish investor indeed that would predict a new high in the next year or two. However I am prepared to position myself for that. Right now we are set for a new upheaval.
The revaluation of the Chinese currency is going to cause chaos. The US is finally trying to get its trade deficit fixed, by getting the Chinese government to soften its naked mercantilist policies and revalue against the dollar. It is my controversial opinion that most of this year's market volatility has been caused by this silent conflict.That has now finally become public.
As the US has limbered up for a revaluation of the RMB against the dollar, China has actively devalued its currency against other currencies, so it will make up the resulting export slack to the US by dumping on the rest of the world.
If I'm right, dollar-denominated commodities will fall, putting a drag on the FTSE where the miners and oilers hold a large sway on the index. Commodities have been used as a dollar hedge: dollar down, commodities up. This is how China has kept its own currency down, by turning its dollars into commodities, in effect, buying dollars and sumping dollars in raw materials and associated activities. With this process diminished, the dollar's fall should be accompanied by a fall in raw material prices.
Meanwhile sterling may be in for a rally, a signal to start looking for companies making their profits in pounds.
Austerity plus inflation is a recipe for a strengthening currency and the pound is still extremely low. It will take another year for the fog of the currency wars to clear and in the meantime it will be a good idea to be cautious.
• Clem Chambers is chief executive of stocks and shares website ADVFN. www.advfn.com