Since the early October lows the S&P500 is up more than 19% in raw terms and about 26% in currency adjusted terms. I think the performance of the US economy and US equity markets is the most under-reported story in all of finance. The US Dollar has bottomed for the cycle.

On the other hand, the most over-reported story is the negative one which remains Europe. There’s no denying that all data from Europe remains horrible.

The euro itself continues to be de-rated, with money flowing back into US dollars. Our target on the euro remains US$1.20, and on that basis we can see the Australian dollar buying 85 euro cents in the not-too-distant future.

So at the global macro level we have good news from America being offset by continuing bad news from Europe. China is the global macro wildcard, but I expect a continuation of better data from China and even some more action from the People’s Bank of China (PBOC) to stimulate the economy now that inflationary pressure has eased.

Unfortunately Australia is just stuck in the middle of this global macro tug of war. Recent price action in Australian equities has been feeble, with that feeble price and volume action exacerbated by summer holidays.

The opportunities

Yet my view is if the world gets comfortable that China isn’t headed for a hard landing, and commodity prices aren’t going to collapse that Australian equities will catch a global rotation bid. Surely, surely, surely Australian equities and the Australian dollar are more attractive than anything in the eurozone.

My theory remains that when global money comes for Australia on the China soft-landing view, it will come into resources first. That’s why I am maintaining a strategic focus on the entire Australian resource and resource service stocks spectrum.

I also think global money will come for Australian biotech shares. While that seems a somewhat strange call, note very well that the mergers and acquisitions (M&A) cycle we predicted in global biotech is occurring as big pharma stares down the patent cliff. In Australia our top three biotechs with corporate appeal remain Mesoblast (MSB), Bionomics (BNO) and Phosphagenics (POH). You should have some biotech exposure in portfolios as a call option on further M&As.

What else is catching my eye? Copper. It is making higher lows and rallying despite the US dollar strength. I think that is bullish with copper seemingly now starting to be supported on the view US housing starts have bottomed. Sandfire (SFR), OZ Minerals (OZL), PanAust (PNA), Discovery Metals (DML) and BHP Billiton (BHP) are the way to play copper outperformance in Australia.

I also just keep looking at this Australian 10-year Government bond chart. My view remains that long Australian bond yields have bottomed for the cycle and will gravitate towards a yield of 4.50% over 2012. When the day comes that money flows out of the over-crowded and over-priced long bond market the beneficiary will be higher yielding Australian industrial equities, led by Telstra (TLS) and the banks.

And finally, it is time to take some trading profits in Suncorp (SUN). Suncorp has been a star outperformer in the financials yet unfortunately we have run into a 10-12% downgrade of short-term earnings due to weather related insurance claims. Suncorp failed at technical resistance at $8.70 and I wouldn’t be surprised to see it pull back under $8 on the back of this downgrade. On that basis, trading profits should be locked in.

Forge Group (FGE) – Buy

In the past month Forge has announced a further $126 million in contract awards for fiscal 2012-13. On the back of these recent contract wins and scope expansions on previously announced work we now expect fiscal 2012 revenue to be about $550 million. With scope for fiscal 2013 revenue coverage to lift substantially (on the back of Roy Hill) the outlook for forge remains positive. FGE generates an exceptional return on equity, sits in a net cash position, with very high operating cash conversion and a cashed up corporate holder on the register (in CLO). Trading at 5.4-times fiscal 2012e EBITDA valuation is relatively undemanding and we retain our Buy rating and target price of $6.50 per share.

• Wednesday’s close: $5.19
• Target share price: $6.50

Ausdrill Ltd (ASL) – Buy

Ausdrill has provided net profit after tax (NPAT) guidance of $48-50 million in the first half of fiscal 2012, with strong operating conditions generating about $500 million of revenue. Ausdrill is a late-cycle mining services play extracting 80% of revenues from the production phase of the cycle. It offers a relatively high level of revenue coverage and has the balance sheet leverage to capitalise on growing demand for contractor services. We retain our Buy rating and at 4-times fiscal 2012 EBITDA, we see valuation as undemanding and continue to see the scope for further contract awards underwriting additional growth in earnings.

• Wednesday’s close: $3.21
• Target share price: $4.00

Important information: 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. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Also in the Switzer Super Report

• Peter Switzer: Is the US economy decoupling from Europe?
• Andrew Bloore: Lump sum or pension? Choose at your peril
• Tony Negline: Should I hold term deposits in or out of my super?