The S&P 500 has established pronounced annual patterns of returns since it bottomed in early 2009: Money printing by the Federal Reserve and/or the European Central Bank (ECB) ignites a 30-40% rally. The rally runs into resistance in the summer due to both a fiscal crisis in the US - end of stimulus in 2010, debt ceiling fiasco and ratings downgrade in 2011, fiscal cliff in 2012 - and the same set of unresolved problems in Europe (Greece, Ireland, Portugal, Italy, and Spain). These concerns prompt a sell-off that has retraced one-half to two-thirds of the prior market gains until another round of money printing restarts the process with a market rally.

Although this 'three steps forward, two steps back' pattern has caused unsettling amounts of volatility, the S&P 500 has more than doubled since the market low of 2009 (see chart below). By contrast, fixed income investments have only returned about 25% over the same time period (based on the Barclays Aggregate Bond Index). Now that almost every major fixed income asset class is trading at record low yields (the Barclays Aggregate yields 1.9%), bonds are mathematically unable to continue generating even this modest level of return. As an extreme example of the limited upside available to bonds, if the yield on the Aggregate dropped to 0%, bonds would only produce a price gain of approximately 9%.

David Fuller's view The lemming run into so-called safe haven bonds has been so pronounced in Europe that people who are presumably fleeing more risky sovereign debt on the Continent are even willing to buy 5-year Swiss Government bonds (weekly & daily) at negative rates. As of today's close they yield -0.019% and have been even lower recently.

Might that be a contrary indicator? I would rather have a portfolio of the European Dividend Aristocrats which Eoin reviews periodically. (Use the 'Search' facility shown upper-left, fourth item down and search under European Dividend.)

Michael Jones also discusses Europe and China in his review above which I commend to you.