Stocks on the way up?
by Peter Switzer
Aussie stocks are getting ready to have a really good year thanks to the Reserve Bank’s overdue big rate cut but there still could be some challenges over May to October. Overnight the Yanks got some good economic news with the ISM reading for manufacturing better than expected and so it means the US economic recovery still looks very credible.
By the way, the Dow hit the highest level since December 2007 when the GFC was just getting started!
The Dow ended up 65.69 points or 0.50 per cent to end at 13,279.32. The S&P 500 put on 7.91 points, or 0.57 per cent to finish at 1405.82.
Looking at the manufacturing data, I now want to see a better than expected jobs figure out at the end of the week for the USA. If it is good, there could be a real challenge to the rule, “sell in May and go away”.
I also think the RBA’s easing campaign for the rest of this year will reduce the Australian dollar’s strength and the lower rates will kickstart consumer and business confidence. This will underpin interest in stocks such as David Jones and Harvey Norman, despite the internet challenges they have, and it will help the overall stock market.
However, Europe remains the fly in the ointment. With China, the USA and Australia all set to grow better, this will help stocks, but Europe, because of debts and elections, will cause problems but they won’t be deep problems like last year.
That’s why I will be a buyer of the dips but I don’t think they will be deep like last year either, so you will have to be astute about when you get in.
If you don’t want to play the share price anxiety game, just buy now and you will be happy in a year’s time.
By the way, as term deposits are set to fall, this will make many retirees go and chase dividend-paying stocks and this will also help the market.
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: Wednesday, May 02, 2012
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