The economic figures released this week suggest that the economy is in a better condition than many expected. However, is this outcome really a product of good management or good luck?
What has worked in the governments favour is that the Australian dollar traded below the $0.70 USD level for most of the March quarter, resulting in exports increasing which in turn helped the economy technically avoid the “R” word. However, the Australian dollar has risen 14 percent since 1 April and at one stage was up nearly 16 percent, so it will be interesting to see what impact this has on the current quarter.
I don’t think anyone in this country believes we are not in a recession regardless of the technical aspects. We need to be cognisant of the fact that things may get worse before they get better. We also need to be aware that even though the share market is bullish right now, we shouldn’t become complacent as conditions could change very fast as we have seen many times in the past 18 months. For now, enjoy the sunshine while it lasts.
So what can we expect in the market?
In the past week, the market has risen quite strongly, in what is a very welcome bullish run, which for most people is reliving some of the pain experienced in the past year. That said, the market did fall away yesterday and may continue to do so for another one or two days although this is nothing to be concerned about. I still expect the All Ordinaries Index to rise over the next 2 to 4 weeks from its current level through to 4200 points and beyond before experiencing a small pull back between 18 June and early July. Given the strong movements this week, my upper target for the yearly high is around 4900 points by late July.
I believe the market will fall heavily in September and then rebound in October before falling away again into the yearly low in November. I need to stress that now is not the time to be borrowing large sums of money to put into the market to make up for past losses unless you are a highly experienced trader. Even, if you are experienced, I would still be very conservative with any leveraging.
Dale Gillham
Chief Analyst
Wealth Within
