Indiscriminate buying all too familiar

August was very negative for risk markets around the world. Then September (and so far October) took off with wild abandon. Wild is the right word. The US dollar began falling again against the basket of world currencies and once more we are seeing a perfectly inverse rebound in pretty much everything else: commodities, equities and high yield debt. As shown in this next chart of corporate bonds, so far it does not matter a wit whether an issuer is an excellent or low grade credit, everything is being blindly grabbed like candy in a scavenger hunt.

If only indiscriminate buying were all one needed to do for successful investing. Alas we have seen this behaviour end badly many times over the past 20 years. At some point in the not too distant future, the tenuous condition of the global economy will come home to roost in a fresh wave of shock and panicked selling, as levered traders run back to liquidity and passive investors are left holding the losses all over again.
What is a rational investor to do? Keep your head. Stick to your prescribed risk management method, execute as your rules dictate, then block the hustle and noise: plug your ears and hum.
At the same time, we should not let green periods in publicly traded markets cause us to lose sight of the massive challenges currently at play in the world economy. This is not what a recovery is supposed to look like. See: Across US, Long Recovery looks like a recession for a good update.