Clock strikes eight in recovery phase
Sydney Morning Herald
Tuesday January 5, 2010
THE sharemarket continues to make gradual gains as people return from summer holidays, the economy being squarely in the recovery phase on the €˜€˜investment clock€™€™.The ASX200 gained 0.12 per cent to 4876.3 points yesterday, and reached an intraday high of 4888.7.This was just 6.6 points lower than the intraday high of 4895.3 reached on October 15 last.The economic cycle moved rapidly through the €˜€˜slow-down€™€™ phase between November 2008 andMarch last year, according to Bourse Communications€™ investment clock. But it also moved through the recession phase in a matter of months, a time when commodity prices, foreign reserves and real estate values traditionally decline.Now the economy is well into the recovery phase with the hand heading towards 8:00, when commodity and share prices rise, according to the managing director, Rod North.A full cycle normally took eight to 11 years, Mr North said, and he expected the cycle to peak again around 2013.He also believes the All Ords could reach 10,000 within four years, driven by better profits from companies that tightened running costs and debt levels during the downturn.But the profits depend on a strong global economy, and a Credit Suisse strategist, Damien Boey, said it was still too early to tell if the US stimulus package had worked as well as those in Australia and China.€˜€˜There is really not that much evidence from the debt [levels] and house prices that we are going to get some sort of recovery in the US,€™€™ he said. €˜€˜If stimulus accounts for all of the recovery we have seen so far, then when you withdraw that stimulus the economy will probably experience a relapse. In which case the sharemarket will fall off.€™€™
© 2010 Sydney Morning Herald