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Ian Macfarlane’s stock market tips

Sharemarkets have fallen strongly over recent days because of falls in commodity prices.

My posting, yesterday, on the RBA’s Quarterly Statement on Monetary Policy failed to note the RBA’s implied stock market tip. The RBA asserted our economy was sound and that the biggest share market boom in 12 years was (nearly) fully-justified by fundamentals. Share market valuations, at average P/E of 18, were only marginally above their average for the past 50 years and, in fact, with yields of 3.6%, were outperforming historic trends.

Although the market’s strong performance was dominated by the resource sector, firm profitability is seen as continuing to improve overall. This optimistic picture is disturbed, perhaps, only by the possibility of moderating commodity prices and international economic problems associated with US public and private sector deficits. These could lead to interest rate hikes, alarm about a possible global recession and a consequent rapid retreat of the local market.
But generally a bullish picture for investors.

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