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A rising stock market could be the best Christmas gift this year!

Peter Switzer
20 November 2023

A month or so ago I created a video for my financial planning clients to soothe their nerves with a Middle East war colliding with the Ukraine war, as the oil price spiked, hitting the petrol price we pay at the bowser. The stock market looked poised to be down for three months in a row in the US, which, of course, hit our follow-the-leader All Ords.

My central argument was simply put: “While it all looks worrying, we are close to a turnaround of market sentiment, which will be great for stocks going into the end of the year and rolling into 2024”.

Thankfully, November has proved me right (which is a nice thing, given some call me a “market guru”, which is something I’d never say about myself but after all these years doing what I do, I guess it’s understandable).

This chart of the S&P/ASX shows how nice the market has been to share players and super fund members.

S&P/ASX 200

Our market is up 4% since the start of November, while the Yanks, who’ve caused these positive plays on stock markets via their great assault on inflation, are up more like 10%!

In case you missed it, this great market news out of the US came because of the latest Consumer Price Index (CPI) number there, which last week said inflation had dropped to 3.2%, when a year ago it was over 7%!

I also tipped the Aussie dollar would rise when US inflation fell, and the money smarties concluded that US rate rises over. That is now happening, which is great news for a so-called market guru.

Aussie dollar (5 days)

 

 

 

 

 

 

 

 

The dollar has spiked 2.2% in a week. Provided the good inflation news keeps coming out of the US, our dollar will keep defying gravity.

Right now, rate cuts in the US seem closer to them than us and that’s good for our dollar. Meanwhile, China came out last week with better economic data. This helps our dollar because a faster growing China means more demand for our exports and our dollar.

This is what AMP’s chief economist, Shane Oliver, saw in that Chinese data: “Chinese economic activity indicators for October showed more signs that growth has bottomed. Retail sales came in stronger than expected at 7.6% year-on-year and industrial production and investment were roughly in line with expectations. Growth looks on track for around 5% this year…”

Helping stock prices has to be the world’s biggest economy beating inflation, and the second biggest global economy getting into the growth groove again.

Throw in these historical facts and I think being positive on stocks makes perfect sense:

  1. The fourth year of a US presidency is the second best for stocks in the four-year cycle.
  2. History shows that when the S&P 500 is down August through to October, the rebound for the market is high and reliable. It has happened 19 times in a row.
  3. The end of an interest rate rise cycle is another plus for stocks.
  4. And these forecasts for US company earnings (in the chart below) are very positive and even surprised me.

Given all this, if the US market keeps rising over the next six months or so, it will be very good for our share portfolios and super funds.

But, one thing, please don’t expect the market to rise in a straight line. I expect ups and downs (experience has taught me that) but it will be on a rising trend. And that’s what a market guru would love for Christmas and beyond!

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