Cup Day in Melbourne could not only return hundreds of thousands of Aussies a nice TAB dividend, it could actually deliver a very valuable RBA dividend to investors!
The whole week is actually going to be an important test of our portfolios with the Reserve Bank of Australia meeting on interest rates on Tuesday and a swag of economic data due out, including lending data, building approvals, retail sales and the central banks’ latest Monetary Policy Statement.
Of course, the rates decision is critical and a rate cut would not only weaken the Aussie dollar but could easily encourage foreign investors to start looking a little bit longer and harder at some of our beaten up stocks. The Dow Jones index is now firmly into positive territory for the year but our S&P/ASX 200 index is still languishing down around 9% and a rate cut could help us change that negative into a positive by year’s end.
Meanwhile, in the States, it’s a huge week with the US Federal Reserve’s interest rate committee looking at interest rates, but as they’re already effectively at zero, the biggie will be the jobs report at the end of the week. That said, there will be the ISM reports for manufacturing and the services sector out as well. Good readings here on the back of last week’s 2.5% economic growth figure could build on the optimism we are seeing out of the US.
Against this, the Yanks’ stock markets have now been up for five weeks and so some retracement is to be expected. Having said that, there’s a decent case that stocks can rally into Christmas.
What needs to happen on Wall Street is a comeback for US banks and that’s why I was happy to see the well-regarded Dick Bove of Rochdale Securities upgrade Goldman Sachs to a ‘buy’.
The best summary of my current position was neatly put together by analysts at Bespoke Investment Group in the US, which was reported on CNBC. This is what they wrote about the market: “[It] is currently at overbought levels that are seen once a decade, much less once a year, and it’s due for at least a pause at current levels … we can continue higher and get back to new bull market highs in the coming months, but at least in the short-term we’re due for a pullback.”
So, given that, why am I so positive that we can rally into the year’s end? Well, I think there’s an enormous supply of money in cash, term deposits and bonds because the stock market has spooked investors since April this year.
Now, if the European Union’s rescue plan holds up – credibility-wise – the US keeps growing, and China continues to defy doomsday merchants with nice economic growth rates and easing inflation, then money will come back into stocks.
That’s the way Dennis Gartman saw it in his newsletter, The Gartman Letter: “Now everyone everywhere is under-exposed to risk and to equities and is scrambling to get aboard … the size of the under-exposure is enormous, and although we cannot quantify that under-exposure, we know it is there.”
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Also in the Switzer Super Report
- Rudi Filapek-Vandyck: The broker wrap
- Matthew Kidman:Â Two stock buys and a sell
- Paul Rickard:Â How Transition to Retirement boosts your super
- Tony Negline:Â Six ways to turbocharge your super
