Business News

Down but not out

| More

by Peter Switzer

Groucho Marx once brilliantly observed that “only one man in a thousand is a leader of men, the other 999 follow women!” Well, one of the women I follow is Goldman Sachs chief market strategist, Abby Joseph Cohen and she’s optimistic on stocks following the very impressive US corporate reporting season.

She told CNBC that reporting season was a good omen.

“We have seen earnings in the US have not only been good, but dramatically better than expected," she pointed out.

She also likes the company and economic news coming out of Europe, and as the EU is America’s most important export market, this is another leg-up for those who don’t believe the double dip story.

By the way, it has been the more export-oriented US companies that have led the way in all of the reporting seasons since the GFC.

The crystal ball

Cohen’s calculations have the S&P 500 at around 1300 by year’s end, given the projected earnings growth and that says a 16 per cent gain on the stock market is a possibility.

AMP’s Shane Oliver thinks the S&P/ASX 200 can top 5000 by year’s end and that would mean around a nine per cent gain.

Cohen isn’t in the double-dip camp and believes there are a lot of potential investors on the sidelines who will rush for shares once the bad news is conclusively behind us.

The news overnight

Overnight, Wall Street couldn’t keep the surge upwards going but there was no zest in the sell-off.

The S&P 500 lost only 5.4 points to 1120.46.

But remember the US market was up seven per cent in July and there’s been a two per cent-plus addition to that for the first day of August. Profit-takers can’t help themselves.

Also, economic revelations weren’t positive but they were not wrist-cuttingly negative either.

Pending home sales were off 2.6 per cent, factory orders were down only 1.2 per cent and consumer spending and income readings were steady.

The economic sign I like is the strength of the Aussie dollar which was up overnight to 91.29 US cents.

Market mover

Finally, remember the jobs report in the US at the end of the week will be the most important short-term market mover. My inkling is there is not enough great economic news out recently to do much for US jobs but as Rachel Hunter, my one-time favourite model once said, “It won’t happen overnight but it will happen”.

Long-term investors must remember this when buying opportunities arise.

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.

The Switzer Super Report is a newsletter and website for self managed super funds. With exclusive commentary from Peter Switzer and Paul Rickard the Switzer Super Report will help you maximise your after tax investment returns and grow your DIY Super. Click here for a free trial or subscribe today.

Published on: Wednesday, August 04, 2010