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Big day ahead

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by Peter Switzer

While the Australian central bank took this week, luckily for local share players the US central bank was a giver. As a consequence, stand by for a great day on the market, despite the Oz dollar’s impost on our share prices.

And in an irony, our banks could easily have a profitable day on the market if the Wall Street lead carries over to the local market. It usually does.

Double whammy

The Yanks got very excited about the double whammy of the $600 billion from the Federal Reserve to pump up the money supply and President Barack Obama playing Santa Claus early by talking about extending the old Bush tax cuts. This is step one in the ‘Clintonification’ of Obama.

When Clinton lost his political majority at the mid-term elections in the ’90s, he shifted to the centre and the economy, as well as the stock market responded.

The market overnight

Today’s 219-point jump in the Dow Jones, that’s a 1.96 per cent lift, shows what an accommodating politician can do to a share market.

And another piece of smart policy from the Fed that will permit healthy banks to raise their dividends has been another fillip for the market.

The market reaction was significant with the S&P 500 Index up 1.93 per cent to finish at 1221.06 and this is the best level September 2008!

The fear index or the VIX is now under 20, which is another positive sign.

Of course, the US dollar went low again and that will push our dollar up. At the time of writing, it was US$1.015.

The lower greenback has pushed up oil prices and that will help energy companies today.

The good news continued to roll with retail sales figures for October coming in better-than-expected.

What’s ahead?

Tomorrow there are the latest job numbers and it would be a big boost to the market if these surprise on the high side but that could be expecting too much too soon. However, they will turn and that’s when Wall Street will definitely be off to the races.

For advice you can trust, contact Switzer Financial Services.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Friday, November 05, 2010