The Market Wrap 7-4-10

Are we heading to new highs?

By Jason Fittler

The best part of writing a weekly newsletter is that everything is in writing. Which means you the client can go back and see if what I said has been right or wrong. All of my newsletters can be obtained online. So if you would like to keep me honest please go back and read through them.

Today we are back to the recent highs in the market, as you can see for the above chart the market has moved back above 4900, the Reserve Bank has lifted rates again this month in an effort to make the economy slow down. Major Banks have followed suit, bad for those with large mortgages, but great for us who hold their shares. This is all pointing to a more positive economy here in Australia.

What is more heartening is that our major blue chip companies are now forecasting good earnings moving forward and the market agrees with their figures. From here I expect that we will see the market move closer to 5200 in the next 6 months. This will mean another positive year for the market; we are slowly clawing back the losses of the previous years.

The other positive news is that the US market is also recovering. This indicates long term we should see our market hit new highs.

Do not become to euphoric, the market will still have its dips as it is still fragile but I do expect to see higher lows (being above 4500) on the dips. Right now I am focused on the second tier stocks such as Fortescue Metals and Suncorp; this is where the higher growth should come from over the next 12 months.