We see the world moving into a new era in which the emerged markets have a much larger role to play. First China and later India are likely to become the largest economies and stock markets. Brazil and other countries, underwritten by natural resources, are also going to do very well. We want to own these, but only if we can buy them at a good price.

The mature markets of the western world are all in secular downtrend, but they do have some good companies operating in the right parts of the world.

It is clear that governments over-promise and underdeliver. They also borrow and spend too much money. They then get out of debt by debasing the currency. It is essential to hedge this risk in the time honoured manner by owning gold.

It is also clear that in the bond markets it is better to hold bonds of great companies than bad governments.

In the short term, however, the US is still by far the biggest economy and the dollar the world's major currency. If equity markets go into risk-off mode then the dollar will rally strongly.

There is a risk of this in the second half of the year, but the situation is dynamic. If markets look like going into freefall, the Fed can change its mind and offer a QE 3, 4 or even 5. Then the dollar would fall further.

On balance, it seems that early May was a selling chance, but not a time to go away. There is still likely to be a mid-summer rally and we will be looking to sell after that. Even then, there could be a change in strategy if the Fed adds more liquidity, or if China allows more growth and prevents any cooling off of the
inflationary pressures.

We must be ready to react, but meanwhile be patient. We should not be accused of doing nothing, we are in a state of masterful inactivity.

And from his world 'world market overview':

Several things may bend our road map out of shape.

If the Fed provides a QE3 stimulus, the dollar will fall further and the market will rise longer than we are currently anticipating.

Secondly, if China decides to stop cooling down its economy in order to prevent an economic hard landing and ratchets up growth again, the low will come before we expect it.

In any event, when fully invested we wish to overweight the growth markets. We also want to hold gold and silver as they are "real" money. All we are trying to do now is finesse the timing of these purchases.

There will be a dollar rally only if markets top out and start falling. It could be a tradable 12% move on average. The gold position is for a much longer time horizon.

There is a big debate over whether we get inflation or deflation. There are good analysts supporting both sides of this debate. It is impossible at this stage to know who is correct but we suspect that the inflation fears are more justifiable than the others. We will respond as and when signals are given on the charts.

We like real assets. We see the best growth in markets that used to be thought of as rather risky. We find that the mature markets are too far in debt to be interesting in the long term.

David Fuller's view I have read each of the market segments and commend all of them to subscribers. Earlier editions of World Investment Strategy can be found in the Fullermoney Archive.

Fullermoney's own medium to longer-term outlook can be found in Friday's 'big picture' Audios covering the various asset classes.