It's time to sell the pound.
In short, while there are plenty of risks, the outlook for the US is healthier than the outlook for the UK. So how do you play this? The trouble is, the US stock market has priced in this sunnier outlook. Indeed, the market as a whole looks expensive, judged on long-term measures such as the cyclically-adjusted price/earnings ratio. So given that there are still plenty of hurdles along the way to recovery, we’d be wary of buying the US stock market at current levels.
However, one area where the US doesn’t look expensive is in the currency markets. The dollar hasn’t been hit as hard by the promise of QE infinity as you might expect.
If you’re comfortable with spread betting, you might want to short the pound against the dollar. The pound’s high for the year was just above $1.63.
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