"You have been saying recently to watch for a breach of the June lows as well as that markets will be higher by the end of the year. Do you see these as exclusive events?

"It seems to me that the markets are dependent for recovery on both an orderly resolution of the European crisis as well as further easing of the monetary policy in the US. Given the real lack of political will (esp Germany) and diminishing economic value of QE3 and reluctance to ease, as well as economic weakness now spreading to developing countries such as India and Brazil, the breach of the June lows seems to very real. Indeed the energy stocks (here in Canada), are not far from their 2009 lows, and seem to be discounting a global recession.

"Assuming this worst case scenario, and a breach of the June lows, what do you see the further downside risks would be for the original FM theme stalwarts (commodities, India, China) such as funds you still hold in your investment portfolio?

"Thank you for FM's continued superb analysis.

David Fuller's view Thanks for your interesting points and questions, and also for your kind words.

My short-term emphasis on the early-June lows is because they are recently established support levels and we cannot have a bigger sell-off without breaking them. However, if the early-June lows are taken out for more than a day or two, sentiment will deteriorate further.

I do not see any early resolution of the European crisis, which was many years in the making, but I think markets would respond more positively if people could see convincing evidence that the financial problems were being addressed collectively, and that steady progress towards political, fiscal and banking union was also occurring.

My view that stock markets will be higher by yearend, as we saw following corrections in 2010 and 2011, is based on the following assumptions: there will be some incremental improvement in the European situation; China-led growth economies will increase their stimulus; western central banks will remain accommodative. There are some obvious risks in this hypothesis: currently, global economies are synchronised in an economic slowdown; this can only lead to corporate profit downgrades; reactive central banks may not act quickly enough, especially the US Federal Reserve which will be reluctant to change policy in the latter stages of a presidential election campaign.

Currently, the most positive recent development for the global economy is the significant setback in the price of crude oil (Brent & WTI). This is probably the best economic stimulus for oil-importing countries.

Lastly, not all Fullermoney investment themes will be in form at the same time, particularly during a global economic slowdown. Our favoured themes in this environment have been Dividend Aristocrats and Autonomies with good yields, provided they do not become clearly overextended relative to their rising 200-day moving averages. That usually ends badly (see Eoin's review below).

My views on miners, China and India are as stated in response to Tuesday's email:

Miners and medium to small-cap shares may be cheaper but most are likely to remain so until investor confidence improves and the global economy strengthens. China and India need more monetary stimulus to improve their growth prospects before they perform once again.