The S&P/ASX 200 Accumulation Index rallied 8.1 per cent. However, the difficulty with understanding stock market performance lies in the fact that turning points in the market, whether peaks or troughs, do not happen on the back of news flow, says Fidelity portfolio manager Kate Howitt.
says that when you look back at when the market bottomed in 2009, it was not a case of the outlook being that much better or that the problems of the economy had been solved.
"In hindsight it had probably more to do with the fact that anyone who could have sold did so, and everyone who was holding either felt like they needed to be there, truly wanted to hold equities for the long-term, or had just lost so much that they did not want to crystallise those losses and decided it couldn't get that much worse," Howitt
"So when you have this technical flushing out of all the loose hands, then that is a pretty healthy base for a bull market to begin."
says one can look at the recent bottoming of the Australian market in two ways.
"You could say that Australian investors have been more bullish about the world economy and more excited by the [Reserve Bank of Australia] easing of the cash rate," she
suggests that it is either a result of changing demographics, with more retirees investing, while your speculative investors have been shaken out of the market.
"Or we're getting offshore investors and dividend funds that are coming in and buying.
Or it's the hypothetical Mrs Watanabe, who is investing her
cheap yen into high yielding assets," she
"What's happening now is that central banks are making truly safe assets unsafe investments from a valuation perspective," says Howitt
"US 10-year bonds and Netherlands 10-year bonds are the most expensive they have been in history.
When you buy an asset at the most expensive it has been in recorded history, then that is not a safe asset."
Howitt says the discussion between an adviser and their clients becomes very simple when put in yield terms.
"You can put your money into a term deposit and get the cash rate plus a pretty skinny margin - maybe you'll get about 4 per cent," she
says that it is possible that the market will continue along the same yield-driven course and there could be a repeat of last year.
"That is the cynical view that sees the Australian and global economies continuing to have lacklustre outlooks because we are on the wrong end of a credit super cycle, which is a drag on growth, and added to this there are demographic headwinds," she
Yet there is a more benign view that monetary policy is pushing people along the risk curve, she
"More fundamentally, the aim of monetary policy is to reignite growth in the real economy," Howitt
"I don't think it is clear yet which way the global economy will go, but what is clear is that central bankers are pushing more money towards equity markets, and that's good for investors."
says that while she
has a cynical view of global markets, she
believes Australia has a more positive outlook.
And all of that creates space for business to do what it does best, which is to innovate and create value, Howitt
Michelle Tate-Lovery, James Kenny, Duncan Knight, Kate Howitt, Australian equties, Belinda Allen, equities, Peter Green, shares