Business News

It’s good news week

| More

by Peter Switzer

It’s good news week with the Reserve Bank rejecting a rate rise yesterday and then Wall Street kicking off with a two per cent jump on the S&P 500 index, again driven by positive news and comments.

Market movers

Let’s cut to the chase and run our eye over the drivers that helped this market spike overnight:

Japan surprised with an interest rate cut.
A great reading from the Institute of Supply Management’s services index which jumped from 51.5 in August to 53.2 in September. Economists expected no change and, better stil,l hiring went into positive territory.
The S&P 500 finished at the 1160-level, which is above the 1150-level that had not been reached since May this year.
The VIX or fear index fell to 22.
The greenback dropped to over an eight-month low.
The market is anticipating the Federal Reserve will embark on quantitative easing which should spark demand and economic activity, after some Ben Bernanke comments.
Goldman Sachs put out a report saying it was time to ditch bonds in favour of stocks.
Warren Buffett, regarded as one of the shrewdest investors in the world, made the observation that shares look cheap, especially compared to bonds.
China is being encouraged to let its currency revalue as most countries are enjoying devaluations to try and kick-start their economies.

Lasting rally?

So can this rally last? Well, you would have to think profit-takers will jump in at some time and there’s a jobs report at the end of the week.

Experts say private jobs will be up but government jobs will be down and this could bring a bad headline number, though the market will look at the private job creation.

The drama continues but it’s great to see that the optimists have the upper hand over the pessimists, at least for the moment.

I think there is more evidence that a Santa Claus rally looks more likely as this year peters out.

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, October 06, 2010