Business News

The NeverEnding rally?

| More

by Peter Switzer

There was talk that a pullback on the stock market was close at hand after such a big run up, but the Dow finished nearly 150 points higher and punched through the 14,000-level for the first time since October 2007 — that’s pre-GFC. So you might be asking, is this a never-ending rally?

You could ask it, but the answer is no. The rally will end and then it will start again, and then retreat, and then kick off again. This will continue until a crash happens, and then we’ll go back to what we saw in March 2009 when the comeback of stocks took root.

Stocks vs. property

It’s a never-ending cycle, so get used to it if you’re in stocks and/or super. If you don’t like it, go long property where your values do go up and down but you don’t really know unless you’re selling.

I have a mate who owns a house that would have sold for around $4.5 million a few years back before the GFC, but now he might get $4 million or $3.8 million. He knows he has ‘lost’ at least half a million dollars by not selling at the top, but he bought the place for less than $2 million!

This is what happens with investing, and for 2013 we’re in rally territory. Even the Sydney Morning Herald posed the question on the weekend “Back to a bull market?”

When newspapers lead with these sorts of stories, it’s a positive in such an early stage of a market recovery. Later in the cycle, I’m always wary of newspapers telling market success stories, and it can be a warning that the end is nigh. The end isn’t nigh in 2013.

The good news

Over the weekend the Yanks got more good economic news:

The jobless rate rose from 7.8 per cent to 7.9 per cent, but the new jobs in January numbered 157,000 and there was a 127,000-job upgrade for the previous two months.
The Institute for Supply Management manufacturing reading spiked higher from 50.2 to 53.1.
Consumer Sentiment also surged from 71.3 to 73.8, according to the Thomson-Reuters/University of Michigan index.
Company reporting also reinforced the idea that the sector is on the comeback trail as well.

For those who like to see the scoreboard, the Dow was up 149.21 points or 1.08 per cent to 14,009.79 while the S&P 500 index was up 15.06 points or 1.01 per cent to 1513.17.

Cautious RBA

The USA doesn’t get many important economic data reports this week, but we do. The Reserve Bank (RBA) will decide on interest rates on Tuesday and our jobs figure is out on Thursday. By the end of this week we’ll have a better snapshot of how our economy is doing.

I’m hoping for a rate cut, but Glenn Stevens worries me as he’s so cautious when I think we need another cut to really help business and consumer confidence.

I do expect to see some kind of market pullback this month, but I will use that as a buying opportunity. There’s no such thing as a never-ending rally, but I reckon it will feel like it over 2013. What about 2014? We will cross that bridge when we get to it.

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.

Watch more from Peter on SWITZER TV.

Published on: Monday, February 04, 2013

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.

What is it with ‘Greeks’ and cash?

Who’s afraid of QE3?

Ignore stupid recession headlines

So what happens this week?

Suddenly, Wall Street went positive – what just happened?