After recent strong gains, shares are overbought and vulnerable to a correction. February is often a soft month with risks regarding Italy, Spain, the US budget and earnings results in Australia.
- However, the pattern of rising highs and lows since late 2011, reasonable valuations, improving global economic news and easy monetary conditions suggests shares have likely entered a new cyclical bull market.
- In the post WW2 period, the average cyclical bull market in Australian shares has seen a gain of 126% lasting over nearly four years.
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