The Market Wrap 29-6-12

By Jason Fittler

Once again, we have seen the market get down below 4100 points before rallying.

In fact, this is the sixth time it has happened in the past 12 months. Regardless of all of the doom and gloom through the media the facts are the market is cheap at this level.

Many investors are sitting on the sideline in cash, with cash rates falling and their yield reducing they are being forced to start looking at alternative investments.

We have already seen the price of fixed rate bonds move up and I am expecting floating rates to start to move soon.

The big four banks are all paying a gross yield of around 10% and have just been acknowledged as the safest banks in the world this week. At these sorts of yield investors will continue invest in these companies.

I expect that we will now see the market slowly make its way back to around the 4400 level. I do not expect that it will move much past this and I do expect that another round of profit taking will start around these levels.

We continue to hold large blue chip companies paying high dividend yields.

The key is to make sure that your investments are working as hard as possible.

The key to this in a low to no growth market in the income they produce.

Our model portfolio is paying around the 7.5% gross yield.

We continue to see little to no growth in the share market over the coming years. Each rally will end a profit taking and each dip will be supported as investors holding cash look to increase their income.

The blue chip companies are undervalued at the current levels as such long term (5 Years) we expect to see good growth in these companies as investor’s appetite for risk increases.

For more information on any of the above please contact us on 07 4771 4577.