2009 will go down in history as one of the best years in our market.
There are two important figures here. The market rose 1125 points or 30% from January to December, but from the lows of March 2009, the market rose 1800 points or 59%. Reinforcing our view, not to panic and sell out at the bottom. For those who invested heavily over the 2009 year you have done well.
If we go back a couple of years, you can see from the below chart that the market is 26% off the highs and back to the level of September 2007.
The gains were made in the blue chip sector with the resources and finance sectors doing very well.
We have also started to see a recovery in the infrastructure sector and the property sector, which is currently restructuring and should have a good 2010. I expect to see a lot of takeover’s in the property sector as the strong take advantage of the weak. I am also bullish on the smaller resource companies. Investors in the resources sectors have looked for safety in BHP and RIO and I expect that investors will start looking for more growth and value in 2010.
Cash is still overweight in the market place; many investors are still sitting on the sideline waiting for confirmation that all is well. This cash will push the market higher at some point in the future. As such I am taking a long term view on investments. I do expect to see the volatility continue, any dips should be taken as an opportunity to enter stocks.
The Australian dollar started the year at 0.72c and closed at 0.92c with a low of 0.62c. One of the major affect on our dollar is interest rates. As Australian companies have re-capitalised and the Reserve bank has taken the steps to increase interest rates to curb inflation giving Australia the highest interest rate in the western world. This is a negative if you have a home loan but a positive in attracting overseas investors to our country, giving our market and economy a boost.
The gold price started the year at $860 an ounce and closed at $1100 an ounce, however, the sale of physical gold has not increased in line. As such it appears that the gold price is being pushed in the futures market as investors look to hedge against the concerns in the US. Going forward we still expect to see the gold price move higher, however, short term I am looking for a pull back.
Oil started the year at $48 a barrel and closed at $81 a barrel. We have a fair value price of $75 a barrel as such it was looking undervalued at the start of the year. I would expect to see the oil price hold around these levels for now.
Even with 2009 being a good year I do expect to see further upside in the 2010 year.
At present the market is trading in a range from 4500 to 4800. The start of the year saw the market break out of this range once again moving above 4900, my next target for the market is 5200 which is another 8% above the current level. This is a short-term target, other commentators are looking at the market getting to around 5400 being 10% above the current level, and they are expecting this in the current quarter.
I also expect to see some sectors out perform; property and small caps being two that I am taking a close look at.
Also if you are sitting on cash, look to get this invested now, before the masses. You can easily obtain a yield way above the bank term deposit rates in conjunction with good growth. In my view cash in no longer king, as such I will be fully invested as soon as possible.
Make sure you keep an eye on our web site www.growyourwealth.com.au for all the up dates and latest ideas.
Happy New Year.