The S&P 500 has rallied to break the highs of 2011, closing at 1374 points yesterday. The Dow this week broke 13,000 points again, the highest since May 2008. The JSE Alsi has rallied to fresh record highs this year, to 34,200 points today.

On Aug 5, 2011 we wrote to clients in this Macro Strat report that

S&P 500 has fallen 10.8% in the past two weeks, to 1200 points at present. The market is substantially more bearish than can be justified cyclically. A strong rebound in h2 is expected. Position to take advantage of a rally that tests the highs of 2011 at 1,360 points. Potential for new highs for 2011 exists, but this is not the baseline.

On Nov 7, 2011, in a report titled “Strategy Update: The return of the reflation trade is near“, we told clients that

Looking abroad, the BOE, BOJ and SNB have all upped the ante with more QE, and once the ECB joins in by purchasing assets without sterilising these purchases, all the major central banks of the world will be engaged in substantial monetary loosening. This is where one wants to be long commodities and equities, and short core G4 bonds, but long junk bonds and European periphery debt once again. The wave of monetary inflation we have been waiting for is upon us, and it is time to position accordingly.

Gold and general commodities have lagged equity markets and EM currencies so far, but we maintain the view that commodities will perform strongly in coming months. The most important fundamental right now is aggressive global money printing.