Oliver’s Insights: Shares climbing a wall of worry

From

The attached ‘Oliver’s Insight’ looks at the continuing recovery in share markets, despite ongoing worries about the global growth outlook.

The key points are as follows:

  • Global growth is likely to be in the process of bottoming ahead of a pick up next year. The risk of a Euro-zone meltdown is receding, more monetary easing is also likely to keep the US recovery going and at the same time Chinese growth should soon pick up a bit.
  • While shares may see short term volatility the combination of a stabilising global growth outlook, cheap valuations and easy global monetary conditions point to further gains by year end and into next year.
  • Meanwhile, Australian economic data released today showed a slight improvement in both consumer confidence and dwelling starts. However, the trend in both is soft.
  • Consumer confidence rose 1.6% in September, but the level of 98.2 remains sub-par relative to longer term averages and is little different from when interest rates started to come down late last year.
  • Dwelling starts rose 4.6% in the June quarter, but this followed a sharp fall in the March quarter and was driven by a rebound in volatile multi unit approvals. Housing starts continued to soften.

Our view remains that interest rates in Australia remain too high to drive a decent pick up in non-mining activity at a time when the mining boom is starting to lose momentum. As a result we continue to see the RBA resuming rate cuts in the months ahead. 

To read the full report, click here.

You must be logged in to post or view comments.