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I’m a dip buyer

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by Peter Switzer

This morning we learnt CBA has cut its standard variable home loan rate by 0.4 per cent and this follows the NAB dropping its home loan rate by 0.32 per cent. This will help stocks and make term deposits less attractive and provided nothing big and bad comes out of Europe, it means stocks go higher this year.

I reckon there’s a general feeling that things —the global economy, the potential for stock markets — are getting better and this will underpin share prices heading up over 2012 and really revving up in 2013.

That’s not to say that we won’t see sell-offs, but I’m less worried this year compared to last.

Cautiously positive

Why more positive, albeit still cautiously positive? Well, US company reporting was much better than expected. The ECB is prepared to play a Fed game and throw money at the debt problems of Europe. China is getting stronger and Asia generally is growing nicely.

Sure, European elections and attitudes to austerity will become friction points, but in a way too much austerity — German-style — is probably not what’s needed now. I think you have to get Europe growing solidly again and when people have jobs, that’s when you can tax them! You can’t tax the 20 per cent plus of Spaniards who are already out of work.

Also the fact that China and the USA are growing better than the doomsday merchants were predicting a year ago keeps the bulls ready to charge as they have been already this year. In simple terms there’s a reluctance to sell-off big time and that’s good for helping stock prices to grind higher.

Wall Street overnight

Proving my point, Wall Street hardly reacted to a disappointing private sector employment report in the US ahead of the important job numbers on Friday. There was also a poor manufacturing figure out of Germany but the Dow only lost 10.75 points to end at 13,286.57 and the Nasdaq was actually up 9.41 points to 3059.85.

Sure there’s a bit of nervousness creeping in and a sell-off will happen but there’s no rush to ‘panicsville’ and so with our interest rates falling it keeps me positive for a nice year end finish.
The battle ahead will be Europe’s weakness versus the growth of the USA and China along with other emerging economies. There will be sell-offs but as I have been telling regular readers — I’m a buyer of the dips!

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: Thursday, May 03, 2012

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