Why no fiscal fear?
by Peter Switzer
There’s absolutely no reason to buy stocks right now but the collective mentality of investors is that they don’t want to dump stocks. Even with the threat of the fiscal cliff, there’s a majority feeling that it will be settled. Of course, if it’s not, there will be a bloodbath on Wall Street and on global stock markets.
To show how relaxed markets are at the moment, the Dow lost 0.23 of a point to 12,816.16 while the S&P 500 was up 0.15 of a point to 1380! This looks like a calm, but is it one before a storm?
US politicians’ negotiations will determine the issue and I really hope good sense prevails, but after years of watching and analysing markets, I can’t help but fear some bigger negative reaction over the next few weeks.
I know Share Wealth System’s Gary Stone — a regular on my Switzer TV program on the Sky News Business channel — is telling his clients that he expects a significant sell-off. Short-term players should consider this view while longer-term players might prepare themselves for a buying opportunity. Either plays will take guts. I do argue that a fiscal cliff solution will eventually turn up and stocks will spike, but I expect drama on markets between now and then.
I could be wrong and I would be happy to be so.
Right now Greece is causing concerns in Europe but not enough to spook the Germans where the DAX was up 5.26 points to 7168.76. The FTSE was flat and the French CAC 40 was down 0.35 per cent.
Japan heading into another recession?
One negative that has held back markets was Japan’s latest read on economic growth. Perpetual’s Matt Sherwood said it was “one of the largest growth contractions in the Japanese economy in the past 20 years” (-3.5 per cent annualised in the September quarter 2012), which raised the prospect of a recession developing in the world's third largest economy, which would be its fifth recession in 15 years.
On the Greek front, its parliament passed the 2013 Budget and has done everything necessary to receive its next bailout tranche, but delays from EU headquarters in Brussels are worrying some quarters as a five billion euro bond payment is due this week for one of Greece’s creditors. This raises fears about a possible default, but I’m sure this will not be allowed to happen.
As you can, we’re in the hands of politicians — I really wish our portfolios and super were in more reliable hands!
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: Tuesday, November 13, 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.