Money
Issue No. 50 - December/ /
Sping in sharemarket’s step
by Jacqui Colwell and Jacqui Colwell
The Australian share market has emerged from the traditionally volatile spring trading season with a clearer outlook for long-term investors.
There is hope for continued economic recovery in Australia as the ‘green shoots’ of renewed prosperity appear to be sprouting.
This has also been supported by recent company profit reports, which show Australian corporate earnings have held up remarkably well despite the global
financial pressures.
Both business and consumer sentiment continue to strengthen as an increasing volume of news suggests the major industrialised countries are at - or close to - the end of their recessions, China and India’s already strong growth rates are lifting and Australia has bypassed an official recession.
Markets have been led by this more positive economic data along with the better-than-expected company reports, but the road to recovery is expected to be a long and bumpy one.
In Australia, the recent company reporting season saw profits down by about a third from the highs of 2007-08. Company guidance for the year ahead has been restrained and we continue to reiterate a long-term focus on fundamentals.
Companies in the news for the wrong reasons through the downturn have so far rebounded strongest. Diversified financials and the banks have been supported strongly since government guarantees were introduced. Industrial companies, highly exposed to economic conditions, have also provided strong returns based on the broad realisation the downturn isn’t as bad as markets were expecting.
Reducing debt to improve balance sheets is likely to continue for some time. Cheap and easy credit has all but dried up, and businesses and individuals are moving to more conservative financing structures as a result.
Individuals are beginning to save more and spend less, a positive for the future even if it may slow the immediate recovery in retail sales. At the same time, companies have made larg...
