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Related topics: Treasurys, Johnson and Johnson, Federal Reserve, ETF, Anthony Mirhaydari

Since last summer, it's been a very good time to be in the stock market. The economic turmoil and price volatility which had become so commonplace were smoothed over. This taste of the "epic bull market" I predicted in September overpowered the popular obsession with bonds and drove the average investor back into stocks in a big way.

Mainly, this was due to the Federal Reserve's $600 billion money dump, teased in August 2010 and confirmed in November. Economists have dubbed the move "QE2" -- short for the second round of quantitative easing -- but the terminology isn't important, and the strategy wasn't new. The Fed started buying back long-term bonds in late 2008 and expanded its "QE1" program in March 2009 to eventually total $1.7 trillion, helping put an end to the bear market.

In short, the Fed has been injecting cheap cash into the heart of the financial system. As a result, equities, commodities and other assets have all pushed higher with nary an interruption. We've had the bailout of Ireland, a midterm U.S. election, revolutions in the Middle East, interest rate hikes in the developing world -- and yet the move has continued.

Image: Anthony Mirhaydari

Anthony Mirhaydari

Since Sept. 1, the Standard & Poor's 500 Index ($INX) has climbed 27%. The small cap stocks in the Russell 2000 ($RUT.X) have added more than 40%. As a result, investor sentiment has soared. Margin trading -- investing with borrowed money -- has become popular again. In fact, brokerage cash levels are now at their lowest levels since June 2007. At the same time, outflows from ultraconservative money market mutual funds have surged to a four-month high, according to EPFR.

There just isn't that much dry powder -- uninvested cash -- left out there.

Yet conditions have become more difficult lately, with the earthquake and tsunami in Japan, a bailout in Portugal and violence in Libya dampening enthusiasm. Inflationary pressures are also on the rise, a nasty side effect of the Fed's intervention. Higher food and fuel prices have scuttled consumer confidence and dampened corporate profitability, and they now threaten economic growth. Indeed, as I mentioned in a recent blog post, first quarter gross domestic product is set to disappoint.

Within days of the S&P 500's late February high, I warned of market trouble. The situation has only worsened since. So is it time for investors to batten down the hatches?

I think so. First I'll tell you why. Then I'll offer some ideas on where to move your money to keep it safe.

A constellation of concerns

There is plenty for investors to worry about right now. America's top-tier AAA credit rating was threatened by Standard & Poor's analysts April 18 when they -- for the first time since 1941 -- put America on downgrade watch. (I presaged this warning and explored the economic impact of the budget-cutting it seems to demand, in my Feb. 2 column.)

Crude oil worries have only worsened as the "Arab spring" has spread to Yemen and Syria. And NATO intervention has resulted in only a protracted stalemate between rebel forces and Moammar Gadhafi in Libya. (I explored the oil supply situation in my March 3 column.)

The economy has yet to show it can stand on its own without the help of government assistance, be it QE1, QE2, Obama's stimulus package or the $858 billion tax cut passed in December. All of these tailwinds are now turning into headwinds as central banks around the world tighten policy and governments cut spending and raise taxes.

The United States is one of the last holdouts. But QE2 is set to end in June and the battle over the 2012 budget -- and the need to raise the U.S. Treasury's debt ceiling -- is just beginning.

And the eurozone crisis is heating up again as Greece moves closer to a debt default or restructuring. The London Telegraph reports that European Union and International Monetary Fund officials are expected to visit Athens as early as next week to review the country's progress on its fiscal deficit and possibly address worries about its current debt levels.