Share Market Wrap 16th May 2008
If we review this week’s budget announcements, it is quite obvious that the government has taken of a cautious approach to managing the economy and in my opinion I don’t believe it adequately addresses the issues needed to curb inflation. Given this, the prospect that interest rates will fall in the coming year is very slim instead I think we will see interest rates rise.
As a society, we have been borrowing to excess for years without consideration for the consequences and many are now paying the price. There is an old saying that cash is king, and in times such as now I would strongly recommend to people who are highly leveraged to start using the extra cash they receive in future from this weeks budget announcements to dramatically reduce their negative debt. For those who are already cashed up, the next year or two will present some great opportunities in both the share and property market.
So what can we expect in the market?
The probability that the 4 year low occurred on the All Ordinaries Index on 17 March is now very high, which if correct means we can expect the current bull market to rise for at least 6 to 8 months although I believe it will last well into next year before we see any major pull back. As a fund manager I am still being a little conservative given that we have plenty of time to profit from the next bull run.
In the short term, you will remember I indicated in my previous report that the current rise will last until around 26 May before finding some resistance. I still expect this to occur with the market likely to peak in the second half of next week or early the following week before falling away again. However, I am confident that the fall will only be short in both time and price, and once it is confirmed it will present some great opportunities to purchase shares at better pricing.
Dale Gillham
Chief Analyst
Wealth Within
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