Let’s take look back!
The below chart shows the movements in the market over the past four and a half years. As you can see from this chart every large drop is followed by similar paced recoveries. This is clear in August 2007, March 2008 and finally in March 2009.
It is during these recoveries that you can make good returns; or for those of us riding the ups and downs of the market, it is when your shares recover.
What is clear now is that this initial recovery is completed.
The question now is, where to from here?
It is true that not all of the ducks are in a row, however, Australian companies have certainly taken the necessary steps to re-capitalise themselves, improve cash flows and structure sustainable dividends. Even if the market does pull back these companies will be able to maintain dividends and income - Once again looking for good medium term investments paying solid dividends which will become core portfolio stocks.
It is true that the gains on these will be slower than what we have seen in the past six months but long term you will still be able to achieve around 20% pa.
My focus is now on the USA, I want to see companies recapitalize and retail sales start to pick up.