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Gillard wins top job; where to for Wall Street?

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by Peter Switzer

The two big stories for the morning for me were that Gillard stepped up to take the top job and that the economic signs are turning to the negative for the stock market.

Let’s deal with the Gillard saga first.

Breaking news

At 7:30pm last night, right in the middle of my program on the Sky News Business Channel, my producer alerted me that there was a tip from our Canberra political team that there would be a spill for the Labor leadership. Rudd was expected to lose — and he did.

On reflection, I shouldn’t have read that out as I could have lost some viewers as they went looking to see the drama unfold and it sure did.

The Caucus led by right-wing factional leaders clearly learnt from the Kristina Keneally experience in NSW that a new woman leader can attract a lot of positive press.

Of course, the cynics will point to the lack of translation into votes, as we saw in the Penrith by-election, however, the NSW Labor team are a very different team from their Federal buddies. The NSW lot are a disgrace and are as popular as Osama bin Laden in New York on New Year’s Eve!

Turn it all around?

Now in the top job, Gillard will need to respond to the resource tax debacle as quickly as possible, which should help our resource stocks.

Can she turn around Labor’s misfortunes? Possibly, despite the fact that her fingerprints are all over some of the Government’s greatest blunders including the batts program, ditching the ETS and the schools building program which gave birth to the so-called ‘Julia Gillard Memorial’ school halls.

Personally, I think she’s more sellable against Tony Abbott and it’s surprising that I have had the same reaction to both her and Big Tony.

When Abbott came on my program to plug his book, I said to him I had told people I was interviewing him and some had said: “That arsehole!” But I said to him that I told these harsh critics that he was a better guy than you think.

His reply on air was classic Abbott.

“Thanks for the support,” he said.

Ironically, when I did a dinner party with Julia Gillard for Today Tonight ahead of the last election, she sat at the table discussing the big issues of the then upcoming poll sitting between Anthony Mundine and Seven’s Anna Coren, and I did conclude that she, like Abbott, was a lot better than I thought.

So the next election will be fought out between two people who are a lot better than most people think or I’m just an ordinary judge!

On Wall Street

Now to Wall Street and the Dow defied poor housing news but it was helped by the Fed’s boss Ben Bernanke who has repeated that interest rates will remain low and for longer than many had expected.

This comes as he downgraded his forecasts on the US economic recovery and that’s why we’re finding it hard to drive the market up, especially with the Euro-debt anxiety prevailing.

The new home sales news was bad with a big 32.7 per cent fall to a record low 300,000 houses annual pace in May.

Also Wells Fargo pulled back its quarter and full-year earnings forecast for Goldman Sachs and this won’t help share prices.

Waiting for Christmas

The one revelation overnight which worried me a little was from my favourite overseas charts watcher — Jordan Kotick from Barclays whose technical analysis has been very accurate.

Kotick says numerous charts including the Baltic Dry Index, which I pointed to yesterday, are pointing to a period of ugliness ahead on stock markets.

Could he be wrong? Yes but it will hinge on the European bank stress tests in mid-July surprising on the better than expected side. And then the US company earnings later in July also have to beat the recent more negative forecasts.

The drama in Canberra and on Wall Street will roll out over the course of this year but by Christmas we will have another new government and another new rally.

For advice you can trust, contact Switzer Financial Services.

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Published on: Thursday, June 24, 2010