Market Wrap 02-02-2017

Before Christmas the market was sitting on 5700, and I made the following predictions:

1.       Retails sales would be slow over Christmas – they did, although not negative year on year growth was nothing to write home about.

2.       Interests rates would move up in 2017 – no move yet but all of the talk is pointing up. Bond rates have already moved up almost 1% in the United States.

3.       Governments would announce infrastructure spends – this has not happened yet but I am still confident that it will. Jobs are the key to economic recovery.

The ASX 200 rose to 5800 before pulling back to the current level of 5600, I still expect to see it above 6000 point this year.

The Trump affect (putting politics all aside) has seen a renewed focus from our leaders to focus on issues such as job creation. Infrastructure is the key to creating jobs and rebuilding the economy.

Add to this the recovery in the material sector over the past 6 weeks (8% gains) and a 15% return for the ASX 200 for the past 12 months, the recovery underway. This s provides opportunities for investors with many quality companies paying dividends over 5% and trading below fair value.  

Keep in mind that Value Investors looks to buy when companies are oversold and cheap; there are some good opportunities at present, as long as you are prepared to wait. 

Market Wrap 23-12-2016

As we head off into the Christmas break it is time to look back over the past 12 month.  The market is up 6.8% on this time last year, since the low of the GFC in 2009 the market has recovered 75% or 8.5% per annum.

The market looks ready to push its way back to 6000 points in the coming year. Given improvements I the US economy with interest rate rising over there, improvements in the price of Iron Ore and Coal it is expected that Australia’s economy will begin to improve in the 2018 financial year. In 2017 we expect to see more budget saving measures as well as increase in government spending on infrastructure.

It will take time for the economic effects of recent improvements to filter down to become economic benefits for the average person, such as improvements in employment levels. My predication for 2017:

1.       I expect retails sales will be slow this Christmas and following through next year.   Unemployment is still high even with participation rates decreasing. Levels of under employment are also increasing. Retail sales will not improve until employment does.

2.       Interest will move up next year, they will still be historically low but there is pressure on rates due to the increase in house prices.  

3.       Governments will start to announce infrastructure spending, I expect up here in the north this will focus on water. Hopefully a Dam or two.  We have already seen the rushed announcement for Adarni Mining.

Investors need to keep in mind that the market is forward looking as such I expect to see the market to continue to raise and head towards 6000 point in the coming 12 months. It will not be straight up it never is. Companies have made the cuts to expenses and consolidated where they can, they are ready to benefit once the government kicks in.

Merry Christmas.

Market Wrap 08-12-2016

In my last news letter on the 24/011/2016 I spoke about higher lows, two weeks later was can see that the market continuesto make higher lows both short and long term. We have seen commoditity prices move up helping  our market along.

You can see in the below chart that since February although volatile, the market is still moving up and is currently closing in on 5600 points. The longer term line runs from the bottom of the GFC in 2012 to now and highlights that the continues to improve.

As we look across our economy unemployment is still high with retail sale down as expected, sure Christmas may see a rush on retail but I do not expect retail to pick up until employment improves. Jobs are the key and it would seem that the Government is on board with Adani coal mine given the green light this week.

So what to buy, the top 20 shares are looking cheap at present along which some of the variable rate preferance shares. The banks have put on good gains over the past month as blue chips start to become flavour of the month again. We are still chasing income for our clients portfolio, although the recovery has started it is by no means a free for all.

We are comfortable holding some extra cash at present while looking for a place to invest it.

Market Wrap 24-11-2016

My last Market Wrap was way back at the start of September 2016. At that time the market was sitting around 5400, the Brexit Vote had happened causing volatility in the market as it initially dropped before rallying to 5600.

Since this last report plenty has happened and Trump has received the most publicity, the US election outcome was responsible for some large intraday swings, initially down 2.7% before rebounding 3.3% the very next day.  The US markets have certainly rallied behind some of the changes Trump has announced and expect to see higher interest rate which is a great sign of a recovering economy.

But do not be fooled, Trump is not the main push behind our market, what has gone unnoticed is that Iron Ore prices have had a great run moving from $0.55 to a high of $0.81, currently trading at $0.75. This is a 35% gain which put our miners mainly BHP and RIO back in the game, keep in mind that Australia is the world leader on producing low cost of iron ore and will benefit greatly from the price increase.

But wait there is more, copper is up and coal has moved from $78 per ton to $100 per ton a 20% increase and of course coal is also a major export for Australia.

Our market is currently trading at 5500 points but since my last newsletter it has been as low as 5000, swings of 10% over a short period certainly can unnerve many investors. But not me! As you can see on the chart provided we have since February 2016 seen the market hit higher lows which is a strong indication that investors are more bullish.

With Iron Ore and Coal prices increasing our recovery is started, however, we now need the government to do their share of the heavy lifting. This is where Trump comes into play, politicians have at least woken up to that fact that the vast majority of people are struggling and it is time to push aside other agendas and focus on jobs in this country.

This for me is the start of the economic recovery in Australia, do not get to excited it will still take a couple of elections at home before the message get to Capitol Hill but at least things at looking up. For investors we will continue to buy on weakness and look for undervalue companies. We still need a long term outlook so we are still focused on high income low growth stocks.  My short term outlook is for volatility to continue but over 3-5 years I expect to see good growth in our markets.

Also we continue to build positions in the overseas markets as they still have solid growth potential over the longer term.   

Market Wrap 07-09-2016

The last couple of months have been positive on market. With the reporting season just gone there has been, as always a mixed bag of results, some of the expected poor results such as Woolworths has performed better than expected as such the price has moved up.  On top of this our market moved above the 5400 resistance point and to date is still maintaining this level.

With interest rates now at  lows of 1.5% and expected to go low, cash has become a poor investment. Add to this that we are now hearing in the media that property prices are expected to fall 20% in coming years the share market is now looking as the best bet for investors. I expect that this is assisting the market to hold above 5400.

Having just gone through an election the current government has 3 years to get things right, I expect that sooner rather than later the government will pull its head out of the sand and look towards real jobs growth. Unemployment is the biggest factor in our economy, to combat this the government will need to start serious infrastructure work.

We have also seen record bankruptcy in the country which is clearing out all sectors allowing major players to earn better profits as price discounting decreases. For me these factors point to companies making better profits, which will lead to economic growth. Do not get me wrong, this may not happen in the next 12 months but by the next election we should be seeing the affects.

The big question I when will be see the market back to post GFC highs of 6800? I expect it will be in the next 3-5 years, as such we currently looking for growth stock for clients.

Warket Wrap 22-07-2016

The market has had a strong bounced since the Brexit lows, good news, but concerning at the same time. The main issue is what is driving the market higher. It is not isolated to just Australia all markets across the world have all seen strong gains.

Brexit’s fear has given way to strong July jobs report and a bullish sentiment among market commentators.  The four key drivers were that Brexit did not spark a financial crisis, US jobs increase above expectations, earning recession could soon be ending and low bond yields make stocks look cheap.

But be careful, with the extreme levels of optimism, this rally could be overdone as the Bulls enter the high risk zone. The market pulled back on Friday as investors look to take profits before the weekend.

As per our chart the market has made a strong move out of the trading zone, we will need to wait and see if it can maintain this levelbefore calling the trend broken. Given the strength of the current move I expect to see the market at least look to retest the top of the trading range around 5300 points.  

At present I am happy to sit and wait for opportunities.

Market Wrap 01-07-2016

If you ever need to see the effect of uncertainty has on the market, you got it this week. Brexit (UK exiting the Euro) saw markets around the world fall 3% on the day of the vote, those countries like Spain and Italy which will be directly affected fell 12%. The problem is that no one really knows how different countries will be affected.

Back here in Australia our exports to the UK are around 5% of total exports, as such it is hard to see how this event will affect Australian companies to the degree it was implied by the market movements. I note however that most of the losses have now been recovered and we are trading sideways again which has been the case since August last year.

Brexit has however caused negative yield bonds, these are bonds which the holder of will lose money on over there term. This is due to the high level of uncertainty over Brexit and again simply indicates how some investors are irrational when it comes to investing.

The big issue next week is the election, promises have been made and come Monday a new government will be formed. The question is will it be a government who can drive the economy or another 3-4 years of a stalled economy. I expect that this will play a large part in our market next week.

Market Wrap 17-06-2016

The market continues to struggle with two major contributors at present. First is the pending vote on the UK leaving the EU. This issue here is that we do not really know what the fall out will be if there is a YES vote. Will other countries follow, if so this would typically be the strong ones which are currently being held back due to the EU structure.

With this uncertainty we are seeing a flight to safety as money is moving out of European currencies into distant havens such as the yen and dollar. This is pushing the London markets down having an effect on our and other markets around the world. Investors are currently sitting on the side line until it is clear how this will all play out.

The second issue is back in Australia with the election heating up, there is always uncertainty around the economy during an election and this one is no different. Investors are again have no clear vision as to who might win and if government will function better after the election. Again we see investors sitting on the side lines for now.

Our market wiped off around 4% this week before rebounding a little towards the end of the week. We are back in the long term trading range between 5100 and 5400 I expect we will remain here until the election is over and the dust settles.

This has however provided an opportunity to pick up a few more quality companies cheaper.  

Market Wrap 23-05-2016

Over the past two weeks the market has continued to trade at the top of the trading range. The market fell into this trading range back in August 2015 and has lacked the support to break through although having a number of attempts.

As we move towards the end of the financial year as it stands now the ASX 200 is down 4.62% but compared to the rest of the world we are doing well. The US is down around 4.29% while London is down 12.14%, Germany 16.31%, Hong Kong 28.03%, Japan 17.13% and China 36.45%. Overall Australia has performed well on the world stage.

Keep in mind historical performance does not guarantee future performance, regards exports Iron Ore price is down 6.97% year to date, copper 27.34% while gold is up 3.61%. Although Australia is a big exporter of Gold it is a small market compared to Iron Ore. Our exchange rate is down 8.3% for the year which is assisting exports.

With the election looming we may see the market rally towards the end of the financial years as promises of Government spending provide work and stimulus to the economy. I expect that we should see the market hold up for now given interest rates at lowest levels ever. The only big concern is China and any surprise announcements that they might have in the coming weeks. 

Market Wrap 04-05-2016

Last week the market rallied but the real gains came on the back of the Reserve Bank cutting interest rates to 1.75% on Tuesday this week. Followed up by the budget this gave the market some expectation that the economy will pick up. We can also expect to see more cash move into the market over the coming months as investors look for a high yield.

The interest rate cut was on the back of negative inflation last month and the Australian Dollar rallying from $0.71 at the start of March up to $0.78 being the high of April. Soon after the rate cut was announced we saw the dollar start to drop. This is due to funds leaving Australia looking for higher rates elsewhere.

This rate drop should provide a platform for increase exports providing a boost from the economy. With the budget out last night there are a number of measures which we will discuss separately which should provide small business the opportunity to look at expanding.

Our market is still inside the trading range it has been sitting in since August 2015 although it is currently trading at the higher end of the range. With an election due in July and the 2016 Budget still fresh I expect that the market will maintain the current trading range in the short term as investors wait for the dust to settle before making big commitments.  

Market Wrap 22-04-2016

This week has been all about the Materials sector with the market pushed higher by solid gains in this sector. BHP put on 30% during the week before profit taking towards the end of the week saw the price drop. What is not showing in the chart is that although the banks made ground this week they lagged behind the Materials sector.  

The weakness in the banking sector indicates more risk to the downside for this sector and the possibility of new lows. As such next week the market will depend on the Materials sector holding up, however, nervous investors may look to take profits.

You can see that the market continue to trade in the sideways channel for now and we expect this will be the case until we receive some economic news to allow investor to be more confidant of future economic growth.

There are still plenty of good opportunities in the market you just need to be more selective. With property set to come off and interest rates historically low Shares are the best option for growth in the median term.

Market Wrap 08-04-2016

The market remains trapped in the sideways movement since August 2015, indications are that the market would like to move higher but the lacks any strong indicator to assist. With election coming up both at home in Australia and in the United States I expect that the market will maintain this trend for some time yet.

The most recent Fed meeting suggesting a cautious approach to raising interest rates given risks from a slowing global economy. Commodity prices and bond yields were higher, and so too the Aussie dollar. On the domestic economic front, construction data and visitor arrivals figures were released this week providing some support on Thursday. Overseas, Federal Reserve Chair Janet Yellen delivered a speech and the European Central Bank released its minutes this week, both events providing support but no increased confidence for the markets.

In company news, Harvey Norman, Nurfarm and ARB Corporation are among a number of companies that trade ex-dividend this week with the Bank of Queensland releasing its half-year result.

As investors questioning the effectiveness of central banks given the slowing global economy, Bond yields and the Aussie dollar were lower, and so too most commodities, although the precious metals segment finished higher.

The current weakness has provided opportunity to continue to dollar cost average in to the market as many companies are now looking undervalued and yields are high.

Market Wrap 24-03-2016

By Jason Fittler

It has been a busy week with clear indication that an election will be in July which will cover both houses has seen the market pull back this week with continuing uncertainty around our economy. Couple with the attack in Brussels this week and once again the economic and political uncertainty will take its toll on the market as companies and investors sit on the side lines.

We saw the market pull back as we headed into the Easter long weekend however this pull back was limited to the Materials sector down 2.5% and the Financial Sector down 2.4%. All other sectors performed well on average up around 0.5% for the day.

As you can see in attached chart the market is struggling to break through the 5200 barrier where we have seen support above this level previously.

For investors you should continue to sit tight, as the next few months will be bumpy, as we go through an election and a budget in May. At present there are no major companies we are worried about but we are focused on Budget changes to Taxation of Superannuation and changes to the medical sectors regards Medicare.

Happy Easter

Market Wrap 07-03-2016

By Jason Fittler

Finally we are seeing some good economic figures, nothing to get too excited about but at least they are not negative. Commodity prices started to strengthen pushing the material sector higher. This produced a strong rally into the weekend pushing the ASX 200 back up around 5100 points; this was a welcome sight for a long term investor like me. It was a strong move indicating that some level of confidence has come back into the market.

There is still some way to go to get back to 5950 points which is where the market was a year ago.

What are we looking for in the coming week?

The key this week is profit taking, Medibank Private is looking like a company which is fully price currently sitting around $2.80 on the back of an approved increase in premiums. Good for shareholders not so much for policyholders. We have seen BHP and RIO also put on good gains along with Cardno over the past week.

We will continue to watch Iron Ore prices, exchange rates and interest rates. The continue talk of a property bubble and the government still keeping changes to negative gearing “on the table” has taken the shine out of the property market. This could see more investors start looking at investing in listed property.

Last week’s move up, was a strong move and if it can find the momentum this week we could see the market stay higher for longer.

 

 

Market Wrap 26-02-2016

We ended the week lower but managed to hold on to some of the gain from the previous week. Continued talk of a housing bubble, negative gearing still an issue and Dick Smith closing the doors because they cannot find a buyer had investors being cautious short term.

It is easy to take a negative short term view, but let’s look at the big picture. In March 2009 saw the market bottom at 3150 points. Next week is the 7 year anniversary of this low, on Friday the market closed at 4880 this is a gain of 55% or 7.85% per annum since the lows. Overall the market has performed quite well over the past 7 years.

The 1987 crash started in September 1987 when the market topped at 2375 it was not until December 1997 that we saw the market at this level again.  What is interesting is that the market reached 2300 points in January 1994 (just over 6 years after the initial drop) before falling away for the next 12 months until February 1995 when it finally started its two year recovers back to pre-crash level.

Fast forward to today, the market topped in August 2007 at 6800 points since then the highest it has been is 6000 points in April 2015 (just over 7 years from the initial drop) since then it has drifted lower. If we use history is our guide, our market only has months left before we see the end of this down leg and the march back to 6800 points begin.

The patterns between the two most recent crashes are very similar, indicating that our market should reach 6800 points in the next 3-4 years.

The Market Wrap 29-1-16

By Jason Fittler

The market recovered from the lows of the start of the year, but there is still nothing to get overly excited about.
 
The market opened the week at 4930 hits highs of 5009 and closed at 4980 putting on 50 points for the week or up 1%.
 
The energy and materials sectors recovered this week showing some sign of life. Nickel continues to be in over supply affecting Nickel players around the world with around 70% of Nickel companies in the Red.
 
There were two mines in Western Australia placed in minimum staff only mode this week with some 100 plus employees stood down. 
 
Unemployment is still the key to the economy recovery however we will jobs, no big surprise.
 
What we are seeing at present is the tail end of the GFC and we fully expect that unemployment will remain high for now.
 
In these times, it is important to buy the underperforming company with a long-term view. See it as if you are getting a discount or a mark it all down sale.
 
We continue to focus on companies providing high levels of income.
 
I expect a recover in 2017 for the economy; as such, the market will remain volatile.
 

grow-your-wealth-market-wrap

The Market Wrap 20-1-16

By Jason Fittler,

The start of the year has been exciting for the market, with the ASX 200 down 460 points from the high 5320 to low of 4860 this is a fall of 8.6%.

Although this sounds bad, if we look back over the past six months the market has been at these lows 4 times.

So what do you do when the market is like this? Do you buy, sell or sit and wait?

The key is to go back to your investments strategy and then review all of the companies individually. You need to work out how the news coming through will affect each company and what is the best course of action.

The key issues are, fall in commodity prices, low oil price, China market falling and the US increasing interest rates.

When broken down each issue, is not that big a deal but having them all at once has caused considerable panic in the market.  Add to this the increasing unemployment issue in Australia and we are seeing the tail end of the GFC.

The next and last phase will be housing prices falling on the back of personal bankruptcy.

Investors, however, should take advantage and buy on weakness.

The Market Wrap 27-11-15

By Jason Fittler

The market has continued to move sideways over the past week maintaining the trading range it has been in for the last couple of months. 

I expect that it will continue this trend into Christmas, as there are no real signs of a recovery in the economy. The interest rate in Australia is expected to stay on hold until next year.

The Feds in the US will meet on the 18th of this month. The US has been hinting of a rate raise but I for one would be surprised if they raised the rate before Christmas so I expect them to stay on hold for now. 

Oil remains flat. Gold pulled back last week. The exchange rate has jumped this week currently around $0.73 per US dollar.

There are plenty of corporate actions going on at present as companies look to raise capital to reduce debt or make acquisitions. Investors need to make sure that they are looking closely at these, as there are some good opportunities available.

The big surprise was Cardno coming out with a rights issue of $1 per share when the price is currently trading at $3 per share. This has pushed the price of Cardno back to $1.75 per share however holders should still look at this offer, as your holding will be diluted if you do not accept.  

The Market Wrap 13-11-15

By Jason Fittler

The market was lead lower this week by the oil price that is currently around $40 per barrel.  

The oil price pushed Santos, and Woodside and BHP lower.  When coupled with the banks these factors brought the whole market down. 

At present, oil prices seem set to stay lower as Oil Company’s increase production to ensure cash flow to keep their business afloat. Keep in mind that generally the oil price is closely controlled through production level via OPES. 

Currently, the economic principals of supply and demand have control. You will remember that about a year ago Saudi Arabia refused to allow OPEC to increase prices by limiting production of crude oil. 

The general idea was to drive America’s shale-oil producers out of business. The issue is, will these shale oil producers simply ramp up production once the oil price rebounds. 

World Energy Outlook released a position that the oil will have sluggish recovery; the best expectation is $80 per barrel by 2020, the alternative is between $50-$60 a barrel by 2020.

Either way we are expecting a slow recovery with oil stocks.

The Market Wrap 6-11-15

By Jason Fittler,

As expected, interest rates were left on hold this week.

Support for another cut is drying up at present with the figures just not supporting the case. 

The housing market cooled off a little. 

I expect that retails will pick up during the Christmas period. 

I expect interest rates will be left on hold and reviewed next year. My call is the next rate change will be an increase in interest rates. 

BHP got hit hard towards the end of the week due to a broken dam at one of their Brazil mines; the mudslide destroyed homes, and there are 45 people missing at present. 

Our market continues to stay in a holding pattern for now with the market dropping less than 1% for the week. 

The majority of the fall came about in the top 20 companies as investors look to reduce exposure to these sectors. 

The bulk of the market remained positive for the week, which indicates to us that this fall does not have a lot of support.

We will watch out of figures coming out of America next week that will provide a better idea of how the world economy is recovering.