Expect more volatility, which could extend not just to stocks but also bonds and precious metals such as gold, says Fidelity Global Strategies Fund (FDYSX) manager Jurrien Timmer.
Gold can behave like a risk asset one day and a safety asset the next, Timmer said. "Think of it as a 'golden triangle,' with gold in one corner, Treasuries in another, and stocks in the third.
"It is hard enough to figure out where the markets are going, let alone what correlations are going to do," he said. "My conviction remains high that over the long term, gold can be a better store of value than government bonds or cash, but over the near term, the asset class can get caught up in the liquidity vise the same way emerging markets do."
Even bond king Bill Gross, head of PIMCO, the world's largest bond-fund manager, missed out on the tremendous Treasury bond rally last year, insisting that emerging-market bonds were the better choice. He was wrong, and trailed his peers.
Still, he said, he expects more of the same volatility in 2012. In a recent note to clients, Gross wrote he expects the January Federal Reserve meeting to "give assurances via language that the cost of money will remain constant at 25 basis points [0.25 percent] for three years or more - until inflation or unemployment reach specific target levels. If and when that doesn't work," another round of government money-printing, or QE3, could come by midyear, he estimated.
"The financial markets are slowly imploding - delevering - because there's too much paper and too little trust," he wrote. "Goodbye 'old normal'; stand by to redefine 'new normal,' and welcome to 2012's 'paranormal.' "
