An investor watching the markets on a daily basis will probably need a dose of pain killers. Day in and day out the markets offers something new to worry about. One day it’s Greece, the next day it’s Italy. The rumors of a recession settling down in the US have been making the rounds on a daily basis too. The growing risk to the European banking system due to the debt crisis is also affecting the portfolio decisions of the investors. What is clear from the preceding instances is that systematic risks are building again, this time the epicenter being Europe.

The lack of a clear ‘Plan B’ for the European debt crisis is putting strains on European bank funding, creating a self-reinforcing debt spiral between banks and sovereign nations. Depositors are withdrawing money from the banking system over fears of bankruptcy or debt defaults. To make matters worse for the markets is a growing slowdown in the US economy, and other major economies around the globe. A careful readings of the world’s major economies indicate that most economies are either contracting or close to it, which includes the US, China, Japan and Germany-the four largest economies in the world.

So what most of the investors are expecting to see into effect by year-end or early next year is another stimulus package that will be preceded or followed by another round of quantitative easing, otherwise known simply as money printing. The economies are simply going to inflate. There is no other way out of this mess (the policymakers proclaim). So the layman should get used to seeing higher prices for their daily necessities from food and gasoline to toothpaste and toilet paper.

Commodities prices have witnessed numerous corrections in the long term. There have been periods since 2001 when bullion has outperformed equities markets. This year has proven to be another period supporting the preceding notion. If history were to repeat itself, expect a sharp outperformance by the stocks. Reason being-stocks are grossly undervalued in comparison to the bullion and a major rise in the equities market is to be believed in the coming days. Investors worldwide are playing defensive because that is what their investment and economic models are telling them, until the government changes the investment game. The trusted models will surely tell the investors one fine day to move from the defensive to the offensive. This change of game plan is drawing closer for the numerous investors.