08 May 2018
Every day we see numerous explanations of what has occurred and why this happened. While explanations after the fact are of little use to investors, few question the explanations. It is not uncommon for headlines to flip (this is only possible on the web) where you might see the Dow Jones fall after jobs numbers, only to wake up in the morning to see Dow Jones rises after the jobs report! There is no way we can get into the minds of all of the buyers and sellers that day and they may change their minds the next day anyway. Sometimes there are obvious events we can point to.
In April, the Australian market had a very good month and the US market only had a small rise if you take out the decline in the Australian Dollar. Maybe that is it? It was all about the currency.
The reality is that traders dominate the short term and it is all noise that you hopefully take advantage of to get better entry and exit prices.
In the real world US profits, boosted by tax cuts, are booming. The big technology companies are growing like they are minnows while outside of mining companies, which have benefited from surprisingly strong commodity prices, companies are struggling to generate profit growth. As a result, stocks in the Australian market that do have reasonable growth prospects are trading at excessive valuations.
For further information or to discuss how we can help you, please speak to your advisor.