Peter Switzer Daily
Go stocks in 2013
So 2012 defied all of the doomsday merchants with our S&P/ASX 200 index up around 14 per cent and when you throw in dividends, you saw a nearly 19 per cent gain. And as someone who had fought the naysayers nearly every morning in this blog, it was very satisfying.
For 2013, I’m expecting another good year for stocks as low interest rates for term deposits will encourage more investors to take a punt on stocks. Sure there will be challenges linked to debts and deficits in the USA, the ongoing debt problems of Europe and its impact on economic growth there, but most analysts I respect have Wall Street up between eight and 10 per cent.
The game plan
Matt Kidman, author of Bulls, Bears and a Croupier Who Stopped Gambling and Made Millions thinks the All Ords could rise 20 per cent this year and apart from issues such as company valuations, the expected cuts in interest rates and the positive overall economic environment, Matt points out that this is a rebound year after a period of “protracted under-performance”, which historically can produce some big stock price increases driving the index to enormous gains.
There has been evidence that shows stocks can rise 40 per cent in a year like the one ahead of us.
Of course, this is only guesswork and history doesn’t repeat like clockwork, but I do think the game plan this year, like last year, will be to stick to quality name businesses that pay dividends but add a bit more exposure to quality cyclical companies in areas such as mining, mining services and industrials not threatened by the Internet.
Also, I will be a buyer when the market dips. Last year I recommended both BHP Billiton and Rio Tinto at nice low levels, when the negative types were writing these companies off and they helped my SMSF portfolio close up 27 per cent.
On Wall Street
Over the weekend, Wall Street went higher with a US non-manufacturing, or services, report from the Institute for Supply Management coming in better than expected.
Also job creation for December was a tad higher than expectations with 155,000 jobs created and unemployment was steady at 7.8 per cent.
Another plus for this year ids the fact that the Federal Reserve boss, Ben Bernanke says he will keep monetary policy easy until the jobless rate hits six per cent and so this will help economic growth and stocks this year as well.
The Dow ended up 43.85 points or 0.33 per cent to 13,435.21 while the S&P 500 index was up 7.10 points or 0.49 per cent to 1466.47.
This should help local stocks today but eventually the current run up will be tested, however it could be a way off with the VIX or fear index falling 37 per cent in three days!
Now this shows investors are starting to believe in shares but it can be a contrarian indicator that a fall is near. For me, I would use it as a buying opportunity but that said, history points to January being the best month for stocks.
Internationally, it’s not a huge week for economic data, while we get to see local construction, trade, job vacancies, retail trade for November, new home sales and building approvals.
It will be the cumulative picture of this sort of data that will determine how many cuts we see this year from the Reserve Bank of Australia. I think there will be two at best, because I think the stock market’s improvement will help business and consumer confidence, but it does mean we’re in the hands of some pretty crazy politicians in Europe and the US Congress.
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.
Published on: Monday, January 07, 2013
Follow Peter Switzer on Twitter @peterswitzer
Get FREE access to the Switzer Super Report. Click here to start your trial.
New on Switzer
- What Baird has that Trump doesn't 20 Jan •
- 5 things you need to know today 20 Jan •
- Mike Baird's strong legacy 20 Jan •
- 5 leadership lessons from Sir Alex Ferguson 20 Jan •
- Investor signposts: All about inflation 20 Jan •
- Combining active and passive strategies with ETFs 19 Jan •
- Simon Bond 20 Jan •
- Martin Seward 19 Jan •
- David Bates 18 Jan •
Get the latest financial, business, and political expert commentary delivered to your inbox.