The Market Wrap 5-12-14

By Jason Fittler

A better week this week but still no clear message of where we are going at present. 

The market closed the week 20 points higher which means it went nowhere for the week.

But there was lots of volatility. The market went as low as 5200 and as high as 5390.

The Reserve Bank left interest rates on hold. And seemed to indicate that there is room for a future drop.

Inflation is running at 2.7% indicating that some of the heat has come out of the market. 

Economists have mixed feelings about this. UBS has advised they expect a rate drop next year while others look to the US and are comfortable that rate must go up.

There are some concerns at play right now.

Families are tightening their belts so Christmas retail spends will be low. This is a good move as unemployment is expected to increase through 2015.

We also see Europe and the US starting to talk about increasing interest rates. The flow on affect from this is a pull back in the Aussie dollar to as low as $0.80.

This will in turn see profits from our mining companies drop. Which means more pain for the Treasurer as government revenues fall again in 2015.

Not a bright outlook for Australia at present and for the market is means volatility is here for some time yet.