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Up, but can the market stay there?

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by Peter Switzer

Wall Street was up better than seven per cent for the week and our S&P/ASX 200 gained 7.6 per cent — the best showing in some three years!

But can it last in a time known for Christmas rallies? History is on our side, with the so-called Santa Claus rally having a high repeat rate but Europe will hold the key with US economic data continuing to tell us that the Yanks’ economy is recovering.

Non-farm jobs shot up 120,000 in November — close to expectations — but more importantly the unemployment rate tumbled to 8.6 per cent from nine per cent the previous month.

This is a psychologically important development — breaking away from the nine per cent jobless level — and provided Europe can give out positive messages, then this rally might be sustained. Over the weekend, the International Monetary Fund talked to Brazil and asked for support for Europe, and the Brazilian government indicated that it would look at the request compassionately — keeping customers alive is a good idea for emerging economies and especially the BRICS group, which includes Brazil, Russia, India, China and South Africa.

The big news story that could make or break this rally will be the 9 December meeting in Brussels where changing the rules in relation to member countries’ budgetary policies will be discussed.

Meanwhile, on the US economic data front, there will be factory orders, ISM services data and consumer sentiment.

As you can see, these are not game-changers but Europe can make or break this rally and so a Merry Christmas and a Happy New Year definitely rests on what the Europeans can pull off this week.

I’d like to give a strong conviction statement but I would only be guessing. The good sense that I expected out of EU officials over the past two years, and their failure to justify it, has exhausted my seemingly bottomless pit of optimism!

I now live in hope and as I have repeatedly argued, hope is not an enlightened strategy.

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, December 05, 2011

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