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.