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Tiger tips optimism

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by Peter Switzer

Okay, we have had a great quarter on the stock market and a fantastic six months to boot but I have always promised readers I would tell them when we’re out of the woods and so here goes.

We’re not out of the woods but we’re a long way from the depths and the centre of the wilderness that emerged in 2008. There are some good omens and one was the finding of form by legendary golfer — Tiger Woods.

After facing his demons and the reality he had created for his family, he spent around 900 or so days in the player wilderness which corresponded with Wall Street’s battle to wipe out the memories of 2008.

March this year saw Tiger win the Arnold Palmer Invitational tournament and the S&P 500 index regained its losses — up 107 per cent — and it is now above the 1400-level which has been a bogey benchmark for the index.

So can Tiger and S&P 500 keep heading up?

Well, I can’t do the form on golfers but can for the market. However, I suspect the answer will be same for both — there are more wins ahead but it won’t be without losses.

Key issues

Let’s look at some key issues for the market going forward. Here they are:

China came out with a better-than-expected PMI reading for manufacturing at 53.1, which reduces fears of a hard landing.
The Dow and S&P 500 had the best quarters in 14 years and financials were the best performers, which is a good out-of-the-woods sign.
The eurozone’s finance ministers raised the ceiling on their rescue funds and this helped EU stocks.
Spain came out with a tough budget, which shows the country is fair dinkum about reform, but you have to hope their people will cop it.
It’s an important week for US economic data but the jobs report is the big one.
Experts think the warm winter has helped job figures and eventually there will be a disappointing month because of this oddity.
Locally the Reserve Bank (RBA) could help our stocks and the economy if they cut rates tomorrow but most economists expect a cut in May.
US housing data has been slightly weaker than hoped for and that’s disappointing as the US needs a recovering housing sector for a real recovery.
The Yanks are expecting some more monetary easing, which is keeping it pretty positive in the US.
Iran remains a festering problem but the fall in oil prices is a plus for stocks.

Market pullback

I could go on but I feel there will be a pullback but no dramatic correction and I like it that Jordan Kotick, the technical whiz from Barclays Capital, says he expects a bull market for the Shanghai Composite. This augurs well for our stocks and if the RBA cuts rates then we should see stocks rise nicely in 2012.

Citigroup’s equity strategist, Tony Brennan, who I taught at UNSW, thinks the S&P/ASX 200 index can hit 4750 this year, which would be another 10 per cent for the year.

This makes me excited, though I know there will be some worrying days and weeks along the way but that goes with the patch. I guess it will be what Tiger’s fans will experience on the course.

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, April 02, 2012

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