Alchemy Wealth Planning - Market Update

 

So where are we now? The last six months has been rewarding for investors with the Australian economy continuing to rally sharply with market strength reinforcing positive sentiment. Through the period from March to October we have seen buyers taking opportunities of an undervalued market and for the last couple of months we have seen some profit taking. As shown in the All Ordinaries index for the past 12 months.



ALL ORDINARIES INDEX

We can continue to learn from the wisdom of Warren Buffet, “Be fearful when others are greedy, and be greedy when others are fearful.” Warren called the bottom of the cycle and gained a paper profit of $A4.1 billion.



Since September we have seen much better than expected economic data from all regions of the world and the prospects of recovery for the global economy are improving. 



So where to next? The strong gains in equity markets over the last six months have every chance of continuing into 2010. The big issue on the horizon will be around what will happen when governments around the world begin to withdraw the large amounts of fiscal stimulus. China and other fast growing emerging markets through their demand for commodities continues to support prospects for Australia’s growth.Our research indicates that the majority of investment managers are optimistic for future gains in the Australian sharemarket. The outlook for all asset classes has continued to improve and managers have indicated that gains in local and global sharemarkets signal the recovery is sustainable. Resilient house prices, relatively low unemployment and improving business and consumer confidence should see Australia continue to outperform most OECD economies. One of the main risks to the economy is now inflation, with the RBA raising the cash rate to 3.75% and potentially higher next year. With the increase in interest rates the RBA will be mindful of Australian Dollar strength. China and broader Asia will become increasingly important to the Australian economy, in terms of trade and capital flows. The International Monetary Fund expects the Australian economy to grow 0.7% over 2009 and 2.0% over 2010.

 

Whilst there is likely to be some turbulence ahead given the road that has been travelled over the last 18 months, many factors point towards a recovery of some substance. We have seen an extraordinary 50% plus rally in global equity markets and that equity valuations could  potentially be stretched. It is therefore important to remain diversified in quality companies with strong balance sheets that can provide sustainable earnings and dividends above market averages.

 

(Ref: Colonial First State, Morningstar, Aviva, HFA and Lonsec)

 

To find out more about current market conditions and to discuss strategies to suit your specific requirement, please call Ashley or Rene our investment strategy managers on 5504 1100.                                     







We would like to take this opportunity to wish you a Merry Christmas and we look forward to assisting you in the new year.

 

Regards

 

 

Alchemy Wealth Management Team

Important note

The information contained in this email is general advice and only contains general information. It does not take into account your individual needs, objectives or personal circumstances.