Bernanke’s bulls stampede
by Peter Switzer
It’s been a bad day for bears and it adds to the case that we’re edging towards a booming bull market. Of course, the US indexes have had a great year so far with the S&P 500 up 12.6 per cent since the first trading day of 2012 and the Nasdaq up a whopping 19.9 per cent!
And it was a great day for the bulls with the S&P 500 up 19.4 points, or 1.39 per cent, to 1416.5 and the Dow 160.9 points, or 1.23 per cent, higher to 13,241.63.
So, what in the hell happened? Remember, the smarties were expecting a moderate pullback based on the fantastic start to the year for stocks already but all of that was forgotten when Fed boss Ben Bernanke uttered the following words:
"Further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies.'' Talking to the National Association for Business Economics, the Fed boss virtually allayed fears that he would be raising interest rates soon and if he needed to help the economy get the jobless rate down he would.
US vs. Australia
He’s the opposite of our central bank boss, Glenn Stevens, though Bernanke does have a basket case economy he’s nursing back to normality. On the other hand, Stevens has a two-speed economy and is struggling with how he avoids inflation from the mining side of the economy without dragging the bigger part of the economy into a near recession. He now has a slowdown and if he doesn’t move soon it could turn into a slow lane of the economy and recession, though in retail they are pretty close to this scenario right now!
This good news for the US economy helped up commodity prices and the Oz dollar recovered from its 104 US cent-level to start our trading day at 105.34 US cents. Anyone who tells you that the Yanks don’t matter anymore — ignore them!
By the way, these words from Bernanke and the impact on our dollar don’t help our stocks because a weaker US dollar makes our stocks look more expensive to US buyers. However, given the fact that about 50 per cent of our market rests on six stocks — Rio, BHP and the four banks — and with US bank stocks going higher, which often helps our financial shares, and a potentially faster growing USA that has to help commodity price demand and the share prices of our big miners, we should see some positive action for our lethargic stock market.
When is the sell-off?
Ben Bernanke’s bulls are stampeding today but the big question for the nervous is — how long before a sell-off? If you wait, you could be disappointed as the market could drift up but given the massive start to the year for US indexes, gravity will have to kick in some time. Maybe it will be a case of sell in May and go away but I must admit I’m not as confident about this cliché/rule this year as I was in the past two years.
Gambling always brings anticipation and anxiety — that’s why people do it.
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Published on: Tuesday, March 27, 2012
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