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What a week for stocks! And what a week for someone like me who’s been sticking his neck out calling the past weeks a buying opportunity. I don’t doubt that sentiment could turn again but it’s good to see positive reality trump negative speculation!

And it continued overnight, with the US jobs report hitting recession-spruikers for a six. Experts were expecting about 200,000 jobs but those irrepressible Yanks created 242,000 in February! The jobless rate remained at 4.9% and because there was a 0.1% fall in average hourly earnings, the conclusion is that the Fed doesn’t have to raise interest rates, if there’s no wage inflation to worry about. That’s a great scenario for stocks and before the close, the Dow shot over the 17,000 mark, which hasn’t happened since early January.

Meanwhile, because these numbers suggest stronger demand in the US, it’s no surprise to see oil prices also increased overnight.

Okay, this is all great news for us and bad news for short sellers but I know we’re not out of the woods yet, with a bag of curve balls still out there that could bring us undone. However, it’s nice to see economic reality bite those damn bears, hedge fund managers and short sellers where their mums never kissed them!

For the week, the S&P/ASX 200 index put on 4.3%. However, since the US stock market turned positive to the tune of the 1812 Overture (it didn’t really but it did stage a comeback of Tchaikovsky proportions from that 1812 level), shares have defied gravity. The Yanks were up 9% before last night’s job numbers, while we’ve surged 7% out of bear market territory.

And helping matters has been a better run of economic data, highlighted by our great 3% growth number on Wednesday and some good readings for manufacturing and services in the States. But what about commodity prices, with oil up over 30% and iron ore up an unforeseen 34%! These reactions scream that the doomsday merchants were far too negative. I couldn’t believe those credible analysts and economists who were prepared to consider a US recession was a 50:50 proposition. And some maniacs were tipping negative interest rates in the US!

What I liked

• The stock market this week.
• Getting up each morning and seeing green on the screen on my iPhone!
• That Aussie growth number but this especially: “Interestingly if the Reserve Bank’s preferred measure of economic growth – six-month annualized growth rate – is taken into account it shows an even stronger 3.4% annualized growth – well above the longer-term average!” (CommSec)
• Australian January retail sales: +0.3% month on month, +4% year on year.
• The Performance of Manufacturing index rose by 2 points to 53.5 in February – a near six-year high. A reading above 50.0 indicates that the sector is expanding. Production, new orders and exports lifted in February.
• Australia’s trade deficit narrowed from $3.5 billion in December to $2.9 billion in January.
• In the year to February 2016, a record 1,163,684 new vehicles were sold – marking the strongest 12-month period on record.
• Home prices in Hobart have now lifted by 8.5% in the past three months. It seems investors and home buyers are shifting away from the traditional growth markets of Sydney and Melbourne and looking for more attractively-priced property in other cities.
• This chart of BHP-Billiton over the past five days!

• Bank stocks this week, with Westpac up 11%, National Australia Bank up 9.1%, CBA up 7.1% and ANZ 10.9% higher.
• China’s central bank pulled its finger out, with the People’s Bank of China cutting the bank reserve requirement ratio (RRR) for the fifth time in the past year and the first time since October 23. The RRR will fall by 50 basis points to 17% on March 1.
• The Fed Beige Book confirmed that activity continued to expand in most districts but varied considerably across regions.

What I didn’t like

• In China, the National Bureau of Statistics measure for manufacturing fell from 49.4 to 49.0 in February.
• No headlines on our great economic growth story in major newspapers! These guys are taking the old “if it bleeds, it leads” attitude to bad news too far!
• Dwelling approvals fell by 7.5% in January, driven by a 9.1% fall in apartment approvals. House approvals fell by 6.1% in January but against that, over the past year, 231,752 new homes were approved. However, this number is just short of the best ever reading for this important source of economic growth!
• The economist I interviewed on TV this week, who scoffed at my suggestion that we might be growing faster than the 0.4% that was tipped. Boy, did I feel like sending him an “eat my shorts” message when that 0.6% growth number for the December quarter came in, taking annual growth to 3%. However, I decided to be gracious.
• The thought of Donald Trump as President of the USA and the leader of the free world.

My fact of the week

I love this one from CNBC: “The Atlanta Fed’s GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter rose to 2.2% from 1.9% after the jobs report.”

This is a classic case of where the real world’s positive revelation has trumped those doomsday merchants pedaling recession, based primarily on negative speculation!

Let’s hope the European Central Bank, the Fed and OPEC over the next couple of weeks don’t do anything stupid to let those damn, pesky bears in with their scary negativity.

Top stocks – how they fared

The week in review

(click the blue text to read more)

• This week I explained why it’s not a crash we’re in, but a buying opportunity!
• My colleague Paul Rickard said it’s time to buy the banks – and since the smarty pants told you to do this on Monday, they’ve all rallied higher!
• Roger Montgomery revealed his position on private health insurer, Medibank.
• The brokers upgraded Caltex and South32. In our second broker report, a number of miners were in the not-so-good books.
• The Super Stock Selectors liked Macquarie Atlas Roads Group and disliked Slater & Gordon.
• Charlie Aitken revisited his investment case for Vitaco. At current prices he says Vitaco will prove cheap over the short, medium and long term.
• Tony Featherstone shared some companies with reliable yield without the valuation risk – Macquarie Group, Perpetual, IOOF Holdings, Retail Food Group, and Rural Funds Group.
• Melanie Dunn gave you a strategy to maximise your SMSFs balance in the face of market volatility.
• And Shane Ellis from SMSF Law Equity Protect gave us some valuable insights into his own self-managed super fund.

What moved the market

• The local market rallied above 5,000 points this week after solid gains from the big four banks and energy companies, and you-beaut data like that 3% annual expansion figure.
• Better than expected ISM manufacturing and services reports, construction figures up 1.5% in January, and a stronger oil price helped Wall Street move higher.
• Wall Street and European markets liked China’s central bank cutting its reserve requirement ratio, which means the banks have more money to lend.
• Markets also liked comments by the ECB boss super Mario Draghi, who, after looking at the latest economic readings for the Eurozone, hinted at a possible monetary policy manoeuvre next week!

The week ahead

Australia

• Monday March 7 – Tourist arrivals (January)
• Monday March 7 – Job advertisements (February)
• Tuesday March 8 – NAB Business survey (February)
• Tuesday March 8 – Speech by Reserve Bank official
• Wednesday March 9 – Consumer confidence (March)
• Wednesday March 9 – Housing finance (January)
• Friday March 11 – Lending finance (January)

Overseas

• Monday March 7 – US Consumer credit (January)
• Tuesday March 8 – China trade (February)
• Tuesday March 8 – US NFIB business optimism (February)
• Wednesday March 9 – US Wholesale sales (January)
• Thursday March 10 – China inflation (February)
• Friday March 11 – US Trade prices (February)
• Saturday March 12 – China monthly data (February)

Calls of the week

• The Reserve Bank of Australia made the call to keep interest rates on hold.
• Warren Buffett, chair of Berkshire Hathaway, said America’s babies born today are the “luckiest” in history in his annual letter to Berkshire Hathaway shareholders published on the weekend, and dismissed negative sentiment by downbeat US presidential candidates.
• My colleague Paul Rickard said banks are in the buy zone, and as I mentioned earlier, the smarty pants was right!
• And for those of you wondering about Charlie Aitken’s position on Vitaco, he’s still a believer and says the business faces a solid growth outlook – go Charlie!

Food for thought

Many receive advice, only the wise profit from it.

Harper Lee – American novelist

Last week’s TV roundup

• Gerry Harvey talks about the reasons behind Harvey Norman’s great results and what’s ahead for the company. Click here for Part 2.
• Chief operating officer of Carsales, Cameron McIntyre, sums up the highlights of his company’s report.
• Charlie Aitken of Aitken Investment Management joins the show to discuss our market swings and his views on the banks.
• And Wilson Asset Management’s Geoff Wilson joins Super TV to talk about how he is approaching the market.

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 one of the biggest movers was G.U.D Holdings with a 1.89 percentage point increase in the amount of its shares sold short to 8.92%. Mineral Resources went the other way, from 15.72% last week to 10.70% this week.

Source: ASIC

My favourite charts

Australia’s economy is a world-beater!

Source: ABC, CommSec

The economy has expanded 3.0% over the past year. This is the magic number where unemployment starts to drop. Newspapers didn’t pepper their headlines with this great story, so I’m doing it instead!

Is the worst behind us?

Source: Yahoo!7 Finance, 4 March 2016

The stock market came roaring back this week past 5,000 – so is the worst behind us? While we might not be out of the woods just yet, I like that positive news is finally helping the market and trumping that bad news brigade.

Top 5 most clicked on stories

• Paul Rickard: Are banks in the buy zone?
• Peter Switzer: This is not a crash but a buying opportunity!
• Charlie Aitken: Vitaco: I’m still a believer
• Rudi Filapek-Vandyck: Buy, Sell, Hold – what the brokers say
• Tony Featherstone: 2 strategies in crowded dividend trade

Recent Switzer Super Reports

• Thursday 3 March, 2016: Making the call
• Monday, 29 February, 2016: A crash course!

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.