Market Wrap - Week Ending Friday 30th Nov 07

By Jason Fittler

Another big week last week with the US markets having the largest two day raise in the past 5 years and the Chinese market falling further before recovering later in the week. The Australian market had a positive week closing up around 200 points. We also saw copper have a very large fall leading the base metals down.

The big questions on everybody’s lips are;
1. How deep will the sub prime go?
2. Will the US Feds continue to cut rates?
3. Has the Australian market bottomed?

Time will tell if I am right but my answers are as follows;
1. The sub prime will get a lot worse before it gets better but this will be dragged out over the next 6 months. However, there are a number of companies and investors around the world waiting for an opportunity to pick up cheap US investments so I think that although the Sub prime has more to run the landing will be softer than I first expected.

2. US Feds in their announcement this week indicated that they will continue to cut rates, the long term bond rates also reflect that interest rates in the US should continue to fall. This will be a long term positive for the Australian market and dollar.

3. Short term I think that a big dramatic drop in the Australian share market is less likely. I am still cautious on the resources sector but in a number of other sectors there are bargains to be had. I expect that over the next 6 months we will see the Australian economy strengthen and 2008 should be another good year on market.

Below is an article "The Stockmarket Crash and Other Stories," from our very own Michael Knox in regards to the US market and as such our own. His view is that the US is cheap at current prices and a big fall is less likely.
Until next week.