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I just could be right!

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by Peter Switzer

Being a cautious bull on stocks since the collapse of Lehman Brothers resulted in the Communist Chinese stimulating their economy ahead of every other capitalist country in late 2008 (which was a massive irony) was a big gamble for a financial commentator and financial planner in the public eye.

But that was a punt I thought worth taking given the crash of stock prices, which was excessive, and the history of markets. By March 2009 the market rebounded big time and since then we have gone sideways and slightly up, while the Yanks are not far off their 2007 all-time highs.

Better than expected

So it makes me content when the media experts, who are largely negatively inclined, have been proved wrong again with US company earnings coming in better than expected. And with China showing signs that the experts were wrong again, we only need to see two other key events confound the experts and we will see nervous investors locked into cash and term deposits making a dash for stocks in 2013.

If these turn up, that’s when we will see some serious rises in share markets! The two events I’m sweating on will be Spain asking for a bailout and the US election resulting in a Congress that will avoid the fiscal cliff.

Close to highs

Overnight the Dow shot up 127.55 points or 0.95 per cent to 13,551.78 while the S&P 500 put on 14.79 points or 1.03 per cent to finish at 1454.92. This should be good for BHP Billiton and Rio Tinto today with materials having a good night.

CNBC points out that “the Dow and S&P are now nearly five and seven per cent away, respectively, from their all-time closing highs in October 2007.” This is a good omen for stocks but we still need some reinforcement from the politicians of Europe and the USA to set us up for a big rally next year.

US news

Helping stocks up overnight especially in Europe were reports that Spain is close to requesting a bailout while German investor sentiment was better than tipped. Also the German Chancellor Angela Merkel was talking about tax cuts for Germany.

In the USA, homebuilder sentiment was up for the sixth month on a trot in October and that’s a six-year high! Also industrial output was up 0.4 per cent in September after falling 1.4 per cent in the previous month.
In a nutshell, there are good reasons to be bullish on stocks and I just could be right, so what is the opposite of “Doh!”? Simpsons fans - I need help.

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: Wednesday, October 17, 2012

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