Investment Outlook

Equities Outlook - April 2010

It is difficult to believe that a little over a year ago the Australian share market… along with its global peers of course, was languishing at a very disturbing 3,100 points. At that time the benchmark ASX 200 index had retreated almost 55% from its November 2007 high of 6,850 points.

It is equally complex to fathom that from those ghastly February 2009 lows, the local bourse has rocketed nearly 60% and has briefly traded above 4,900 points; without doubt a more palatable level!

So what has changed? Have global economic conditions improved dramatically? Were they never really as bad as economists had originally thought? Were equity markets driven by so much fear they became so oversold there was nothing left to liquidate? Or was it simply the fact that plain old sentiment was at an all time low?

In short, it is difficult to know. Certainly, economic circumstances the world over had severely deteriorated and yes, stock markets were heavily sold down as fear gripped investors scrabbling to exit positions at virtually any price. However, it was sentiment that was completely shot! Investor sentiment or confidence if you like, drove markets into the abyss.

Fast forward a year and once again investor sentiment has reigned supreme. Positive economic news and encouraging company earnings have contributed to stabilising nervous markets.

All else remaining equal, it is possible to see the ASX 200 trading up around the 5,500 mark by year end. Any dips in the market should be viewed as buying opportunities for long term investors.