Could negaticity disappear?

The Experts

Could negativity disappear?

by Peter Switzer

Another week of high expectation starts and you would have to think that the chances of a positive week on the markets is about as likely as the Prime Minister getting a big positive spike in the popularity polls. But in this game, you never know and just when you think things couldn’t improve, along comes a left-field development that changes all of that.
Last week for my Switzer Super Report, which is a newsletter for those with a self-managed super fund, I looked at a range of factors that could help market sentiment turn around. I also linked these positive factors to my charts guy on my Switzer program on Sky News Business Channel, Lance Lai, who looked at the S&P 500, the German DAX and the Shanghai Composite which were all pointing to the upside, despite so much worrying news around at the moment.

Positive end to last week

So, what could happen this week to make the case for positivity?

Well, Wall Street ended positively on Friday with the Dow up 67.21 points or 0.53 per cent to 12,640.78 while the S&P 500 was up 9.51 or 0.72 per cent to 1335.02.

Ironically, worries over banks are a major European concern with 15 of the world’s largest banks downgraded by Moody’s last week, but it was banks that led the market higher on the New York Stock Exchange.

Also a bit of last week’s sell off was disappointment that the Fed did not give QE3. However, US economic data is weakening and while I don’t believe there’s any chance of a recession in the States, a slowdown is happening and President Barack Obama could be cooked if the economy doesn’t pick up before November.

Big watch

So what could turn this around?

The big watch will be on the June 28-29 EU Summit where the political and fiscal challenges for the Union will be looked at. What they conclude, say or possibly agree to could be a market-turning event. Of course, given history, it’s not likely but you can’t rule it out if you’re not a pessimist.

Data out of China will be important with the official Purchasing Managers Index out this week, which adds in government demand. The private sector reading last week was disappointing.

In the US there’s a lot of economic readings on the housing sector — sales and prices — as well as a manufacturing number and the latest take on economic growth.
I suspect that we will see a slow drip of better news compared to the past and though the decisions or developments won’t be as good as markets would like them to be, this is exactly what living in a “muddle-through” recovery is all about.

In Australia, most of us have jobs, most businesses aren’t going to the wall, confidence for business and consumers is below average but it’s not disastrous and growth is great for Western Australia, Queensland and the Northern Territory, but OK to weak in other states and territories. Victoria is growing at 2.6 per cent but NSW is at a very slow 0.7 per cent.

When Europe finally comes up with a credible plan, then we will be off to the races. In fact, provided the Yanks’ election does not spook market confidence, then it might be November, around Cup time, that it could all happen.

In fact, the election is on the first Tuesday in November — now that’s an omen!

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Watch more from Peter on SWITZER TV.

Published: Monday, June 25, 2012

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