[table “164” not found /]

Wall Street was positive, the job numbers were good, the US dollar was up, Japan disappointed, Saudi Arabia hurt the oil price and energy and materials stocks are under pressure – yep, it’s back to the future.

When I saw our 83-point slump evolve on the S&P/ASX 200 index on Friday, I instantly thought: “First day of a new quarter, the smarties who tried it on in January are up to their old tricks again.”

Despite our bounce back from the February lows, it was a crummy quarter, with our market down 4% but the Yanks were up 0.8%. I guess you should put this down to the fact that their dollar went down and ours went up but it’s a little more complicated because 38% of our stock market is the financials, which have been clobbered. And guess what? They could be on again on Monday!

Given what’s happened to materials and energy stocks on European and US stock markets, it can’t be good for our market – it could be back to January but I really think there’s less reason to go back to that exact episode. Why?

Well, the case for bears hasn’t been improved overnight. Why? Try these pearls:

• The US March jobs report brought 215,000 jobs and while unemployment went from 4.8% to 5%, the participation rate also rose, so this doesn’t look like a recession-bound or slowing economy, does it?
• US manufacturing was also better than expected and was in expansion mode.
• Chinese manufacturing came in better than expected and in expanding territory.
• The VIX or fear index was below 14, which says US investors are getting more comfortable with stocks.

These are good reasons to believe the Yanks won’t revisit the January market fear and loathing but I’m not so sure about us. And here are the reasons why:

• US crude oil futures fell $1.39 to $US36.95 a barrel overnight.
• Saudi Arabia needed to tell us that it won’t be freezing its oil output, unless Iran and other suppliers do too!
• Those great US job numbers have already got tongues wagging that an interest rate rise is more likely sooner rather than later – yep, it does have a real back to the future look about it, doesn’t it?
• Japan’s disappointing business sentiment report sent the Nikkei down 3.55% yesterday, which didn’t help our stock market and the demand for resources story because these guys are still our second most important export customer!

Okay, there’s a lot of worrying stuff out there for our stock market this week and quarter but is there anything good? Well, the Dow was positive at the close of trade, which says the good economic news has forced the bears back closer to their caves. However, higher rate talk, maybe sooner rather than later, is still keeping a cap on unbridled stock market enthusiasm.

Sure, the Yanks will have to deal with the notion that rate rises don’t have to mean it’s a disaster but it really means that the US economy is coming good and approaching the normal kind of economy that we knew prior to us putting these three letters together – GFC!

What I liked

• The US economic data overnight from 215,000 jobs to the ISM manufacturing for March, which was 51.8 beating expectations and it was higher than February’s 49.5 reading.
• This from CNBC: The “ISM number was much better than expected,” said Peter Coleman, head trader at Convergex. “We’ve been in an uptrend for a while here. I think people … want to put money to work.”
• Bell Direct’s Julia Lee in yesterday’s great Switzer Super Report webinar telling me that she has done the numbers on “sell in May and go away” and insists the history doesn’t support our excessive concern about the month and it’s market madness reputation. Hope she’s right for this year!
• This from the Cleveland Fed President, Loretta Mester, who actually votes at the FOMC meeting on rate changes, “…policy will remain easy for some time as headwinds justify it.” (I think they are more external to the US but this should work against those who will soon run the story that an April rate rise is back on the table because of the good economic data.)
• The Chinese manufacturing purchasing managers index rose from 49 to a 9-month high of 50.2 in March. The equivalent gauge for the services sector rose from 52.7 to 53.8 (any readings above 50 indicate expanding activity).
• House prices are still on the rise, albeit more slowly but that was APRA, the RBA and the Government wanting to cool down the hot sector. Here’s the latest take: “Over the year to March, capital city house prices rose 6.6%, while unit prices lifted 4.7%.  The strongest growth in house prices over the year, with an increase of 10.7%, was in Melbourne. The strongest growth in unit prices was in Sydney with 7.3% growth. House prices over the year to March rose in all capital cities except Perth and Darwin. Unit prices fell in Canberra, Darwin and Perth over the year but rose in the other capital cities.” (St. George Bank’s chief economist, Hans Kunnen).
• The month of March, where our stocks were up 4% but over the quarter were down 4%. When you fall 4%, you need a bigger rise to get back to where you started.
• This Shane Oliver chart showing that April has a habit of being seasonally good for our stock market:

• The AIG’s manufacturing conditions PMI rose to a booming reading of 58.1. “In fact, the Australian manufacturing PMI is amongst the highest in the world, testament to the boost provided by the fall in the $A since 2011,” said AMP’s Oliver.

What I didn’t like

• Saudi Arabia’s production cut comments and the 3% slide in oil prices.
• US consumer sentiment fell to 91 – a good reading but it was a five-month low. The worry for consumers, ironically, was the country’s economic outlook!
• The irony of this fact: the average price of US gasoline costs $2.06, a 17% hike from the $1.76 they were paying a month ago. So, higher oil prices are good for stocks but not for the economy. Someone has to have a long talk to market players on the importance of the economy and why lower oil costs should be good, not bad, for stocks!

One extra like

This factoid from CommSec’s Craig James: “Changes in the demand for $100 notes is one gauge of underlying investor confidence. (People flock to physical cash in uncertain times). While the value of $100 notes on issue hit a record high of $32.51 billion in March, the annual growth rate eased to a 14-month low of 9.5 per cent.”

Top stocks – how they fared

[table “163” not found /]

The week in review

(click the blue text to read more)

• This week, Charlie Aitken gave us a local stock idea with all the hallmarks of a Buffett investment – Transurban Group (TCL).
• Continuing on with the Buffett theme, Barrie Dunstan explained why Buffett’s careful approach to investing has ensured the success of Berkshire Hathaway. There are some tips in this for all of us!
• Tony Featherstone shared a number of turnaround opportunities to consider, including South32 (S32), CYBG Plc (CYB), Austal (ASB), Lifehealthcare Group (LHC) and Capitol Health (CAJ).
• The brokers placed Ardent Leisure in the good books and ANZ in the not-so-good books.
• In Questions of the Week we answered your questions on Sirtex and paying for advice.
• And Christine St Anne told you what the experts are saying about the banks and revisited Tony Featherstone’s call on Ardent Leisure.

What moved the market

• Wall Street moved higher after Fed boss Janet Yellen implied there wouldn’t be an April rate rise in her speech at the Economic Club of New York.
• A solid ADP jobs number (200,000 private sector positions created in March) also helped the Dow Jones.
• The world picked on our banks this week with an anti-bank story in Forbes (written by Steve Keen) while investors still seem spooked about ANZ’s increased credit provisions.

The week ahead

Australia

• Monday April 4 – Melbourne Institute Inflation (March)
• Monday April 4 – Retail Trade (February)
• Monday April 4 – ANZ Job Advertisements (March)
• Monday April 4 – Building Approvals (February)
• Tuesday April 5 – Weekly consumer confidence
• Tuesday April 5 – Reserve Bank Board meeting
• Tuesday April 5 – International Trade (February)
• Tuesday April 5 – New car sales (March)
• Wednesday April 6 – Reserve Bank Speech
• Thursday April 7 – Tourist arrivals (February)

Overseas

• Monday April 4 – US Factory orders (February)
• Tuesday April 5 – US Trade Balance (February)
• Tuesday April 5 – US ISM services index (March)
• Wednesday April 6 – US Federal Reserve minutes
• Wednesday April 6 – China services index (March)
• Thursday April 7 – US Consumer credit (February)
• Friday April 8 – US Wholesale sales (February)

Calls of the week

• Tony Featherstone tipped 6 stocks that could buck the trend and turnaround, including South32 and Austal. Contrarians listen up!
• PM Turnbull has turned to the states in his recent tax proposal, which would allow states and territories to levy their own income tax as a way of funding state services.
• In a bid to increase market share, San Francisco based company Uber made the call to cut uberX prices in Melbourne by 15%. The company will reimburse drivers at a minimum $30 gross per hour in the coming weeks.
• Michael McCarthy from CMC Markets made the call that we could see 5900 this year. It’s optimistic, but it’s the kind of call bulls like me really hope comes true!

Food for thought

The investor of today does not profit from yesterday’s growth

– Warren Buffett

Last week’s TV roundup

• Is the global economy heading towards a better growth story? To discuss, David Bassanese of BetaShares joins the show.
• State Street Global Advisors’ Jonathan Shead joins the show to discuss the new way to play retirement in a low-rate environment.
• Charlie Aitken joins the show to talk about recent market movements and how he’s investing right now.
• And if you missed Charlie’s talk at our recent Switzer Investor Strategy Day – catch up here! He explains why you should consider investing offshore and the ‘power of observation.’

Stocks shorted

ASIC releases data daily on the major short positions in the market. These are the stocks with the highest proportion of their ordinary shares that have been sold short, which could suggest investors are expecting the price to come down. The table also shows how this has changed compared to the week before.

This week Monadelphous Group had a 5.78 percentage point decrease in the proportion of its shares sold short to 11.51%.

Source: ASIC

My favourite charts

Dividend delights!

It’s dividend harvesting season! CommSec shows how listed companies paid nearly $9 billion dollars to their shareholders this week and the fun continues next week with $4.7 billion to be paid!

Greys gain as babies bottom

A recent report by the United States Census Bureau states that we will shortly enter a period where there are more elderly people than children! This will happen just before 2020 and according to the report, is an unprecedented demographic phenomenon.

Top 5 most clicked on stories

• Charlie Aitken: Buffett’s dream investment
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• Charlie Aitken: 7 structural growth themes
• Staff Reporter: Buy, Sell, Hold – what the brokers say
• Peter Switzer: 5 investment insights from the Switzer giants

Recent Switzer Super Reports

• Thursday, 31 March, 2016: Learning from a master
• Thursday, 24 March, 2016: Don’t invest in the past

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.