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Core predictions for the rest of 2011

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by Peter Switzer

Another good night on Wall Street driven by improving economic news makes me feel cautiously confident on my core predictions.

Here they are to recap:

The US economy improves.
The US corporate reporting season will not disappoint, though some companies exposed to Japan, weather and high oil prices could wobble a bit.
The EU debt dramas get dealt with, albeit that it still leaves lingering doubts.
The local economy is doing it tougher than the RBA and Treasury predicted.
Inflation will be an OK reading.
Interest rates could remain on hold for the rest of the year, though I would not be surprised if the RBA tried to sneak one rise in later in the year.
China keeps growing but not too fast to cause excessive inflation fears.
Our dollar remains high but will give ground as the greenback picks up late this year or early next year.
Wall Street rallies later in the year.

That’s been my position for a long time and regular readers and clients will know that. I expect a few curve balls will take the stock market down like we saw across May and early June but as I argued then, I maintain these are buying opportunities for the long-term investor.

Wall Street overnight

Overnight the Dow was up 93.47 points to 12,719.49 while the S&P 500 index was up 14 points, or 1.05 per cent, to 1353.22 and better economic news is helping these markets.

Want proof? Well, try 157,000 new jobs for the private sector in June and jobless claims dropping more than expected!

Oil prices are up over US$98 a barrel, which is another positive sign and even retail stocks are doing well. This isn’t an economy heading towards a double dip recession.

The next test for the S&P 500 is 1363 and that’s only 10 points away but if the job numbers out tonight are better than expected then the market will punch through that level for sure.

There should be some interesting market stuff out next week.

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.

Watch more from Peter on SWITZER TV.

Published on: Friday, July 08, 2011

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