Market Wrap - Week Ending Friday 11th Jan 08

By Jason Fittler

What a week… We’ve heard the “recession” word and the “depression” word thrown around; Ben Bernanke came out and threw his weight behind the market making it a 92% chance the feds will cut interest rates once again to take pressure of the Sub Prime issue. This could mean a cut of up to 50 bases points of 0.5%.

We saw our market fall 250 points or 4% closing at 5981 this week amongst what could only be described as panic selling. If we take one step back and look closer at our economy we see that given the current fundamental our market should be tracking higher. GDP is running at 3.5%, unemployment is at a 30 year low, federal budget is in surplus, our economy is best positioned to take advantage of the growing Asian demand, there is low inflation, retail sales are hitting levels not seen since 2004 and building approvals are up. On top of this brokers forecasts indicate that our market should be at a level of around 7000 which indicates an upside of at least 16%.

Daniel Goulding our resident Bear turned Bullish last week and is expecting that 6000 will be the bottom of the market. Do not mistake this for advice that the market will make a spectular recovery in the coming days. I would expect the market will still struggle for the coming weeks and months as we have a few hurdles to jump yet… Including sub prime refinance, interest rate hikes and first half year reporting in February. Any of these could see the market take a fall.

Expect volatile times over the coming months, look for good value stock which has been oversold on panic selling paying good yields and buy with a long term holding strategy.

Remember fortune favours the brave.

Until next week.