Stocks poised for a good 2012
by Peter Switzer
Things are getting better and I reckon there are more investors believing the worst is behind us. That’s why bonds are being sold off in the States and it’s a good omen for stocks.
For the record, the Dow was up 16.42 points to 13,194.10 while the S&P 500 was basically flat at 1394.28.
I can’t get too excited but I’m getting the gradual feeling that the worst is just about behind us, though I think Europe will pose some issues over the year. But that said, some good stuff is coming through.
Bonds in the USA are being sold and that means the professionals think US interest rates are going to start to rise and while it might not be this year, it will be sooner than what we thought six months ago.
At the moment, bonds are being dumped and that money will eventually find its way into the stock market. There isn’t a stampede yet but there’s a trend.
Overnight US economists gave the economy the thumbs up and suggested the next issue to watch will be inflation, which then leads to the need for interest rates to go higher.
But all of this is normal for a well-performing economy and we have been hoping that the US would again look like a normal economy not needing interest rates close to zero per cent!
Meanwhile CNBC pointed out that banking expert analyst Dick Bove thinks “banks will surge 25 per cent this year” which will not only help US bank stocks, it’s bound to help our bank stocks as well.
The latest stress tests for US banks suggest that their fundamentals are heading in the right direction and that’s good news for optimists who have been rooting for the US to rid itself of the basket case tag.
What I’m seeing is a gradual build-up of reasons why stocks can have a good year this year — not necessarily a great one, though that could happen. I know there will be some tests out of Europe but given the latest approach from the European Central Bank, I feel the worst could, and I say could, be behind us.
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: Thursday, March 15, 2012
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.