Market Wrap - Week Ending Friday 23rd May 2008

"But this is not all doom and gloom as we expect to see the market recovery towards the end of the year."
Last week you may have thought the worst was behind us and it would be all blue sky from here on. As we have said many times the market is still expected to pull back over the coming months and this week we have seen the start of this.

As the below chart shows we are back into the 5500 to 5800 trading range and I expect we will see it break to the downside of this range in the coming weeks. Do not be surprised to see the market get back to 5100 in the coming months. But this is not all doom and gloom as we expect to see the market recovery towards the end of the year. Below are some key indicators of what we think will happen over the coming year.

1. Market should return to fair value of 6600.
2. Aussie dollar will move above $1 US possible as high as $1.20.
3. Interest rates should rise as high a 2% from current levels.

Again we need to get back to basics and focus on companies with high sustainable dividends, low debt levels and high free cash flow. Buying these companies now, and riding out the next 6 months will set your portfolio up for a great couple of years.
 
Until next week... 
 
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