Last week we wrote about Investing in 2013 suggesting that 2013 promises to be less challenging than 2012. Given there is still plenty of money on the sidelines and that the RBA cash rate is expected to fall even lower than the current 3 percent, the share market is a logical avenue to achieve better returns than the dwindling cash rate. And the markets pushed even higher this week.
Yield and capital growth will be a recurring theme again this year. In today’s article we do a top-down analysis of the Australian market as 2013 gets underway in an attempt to assess what may be ahead for us in 2013.
Australia in 2012
The Aussie market rebounded strongly in the first quarter of 2012 and again in the latter quarter of the year. The gains were led by the stellar performance of the banks and other high yielding sectors throughout the year and were eventually joined by the materials and industrials sectors, with money moving from the sidelines as the RBA cash rate fell to 3.0 percent. All in all many investors will be ruing not participating in the eventual returns in equities for the year, but even as late as the end of November the ASX was looking at subdued returns for the year.
2013 has begun with a bang as investors, who have been heavily weighted in cash over the past couple of years, scramble to get on board the equities train. The ASX 200 has jumped 3.5% year-to-date (YTD) and is up a whopping 11% from its November lows (refer to the chart below). We may see the market trade even higher near-term if the market does not consolidate which is what the bulk of the retail investors are waiting for.
There is an old adage about the market in that it will go in the direction that causes most pain to the vast majority of investors. At the moment it is very painful for those investors who continue to sit on piles of cash as the share market runs away.
The Australian economy is heavily dependent on the commodity cycle, so let’s check out what’s happening with commodities.
Commodities had a roller coaster ride throughout 2012. Gold, silver and copper prices shone, but aluminium and crude-oil prices underperformed. Crude-oil prices actually finished in the red for the year, as illustrated in the chart below. Base metals had another tough year, weighed down by the slowing economic growth in China.
Iron ore was a major driver for the materials sector on the ASX, with spot prices ranging from over $US140 down to below $US90 and then recovering over 60% from their September lows, to once again trade over $US150. Expect iron ore prices to drive our materials sector again this year.
This chart also illustrates that commodity prices have begun 2013 with continued momentum.
Gold is holding its long-term uptrend as long as the $US1,600 support level holds, the price should be support by all the central bank easing that is happening world-wide. Copper has been crawling higher in the past eighteen months and the 320 level needs to hold to support the current drift higher. Silver has been crabbing sideways for the past couple of years and looks set for a major move medium-term. Crude-oil is trapped within a range between $US80 and $110, with $US100 the key pivot level this year.
The positive trader sentiment has continued into 2013, as seen by the green bars on the above chart.
Investment Themes For 2013
Investors will need to be nimble again this year, in managing their portfolio and trading positions. “Buy and hold” has not worked in the past few years, resulting in investors having to become more active.
Next week we will analyse the market by sector and identify some interesting trends. If you can’t wait till next week then request the bonus below, which also highlights investments themes and how to invest for 2013.
We have compiled a Special Report on Investing in 2013, where we cover:
• Evaluation of the Australian market and what to expect in 2013.
• Evaluation of commodities prices.
• Top-down sector analysis on the Australian market.
• Sectors to focus on this year.
• Investing for Yield and our view on interest rates.
• Investment themes
• How to survive 2013
For a free BONUS report: email firstname.lastname@example.org... or call 1300 610 024.
You can also request the trading results from our Advisory service, which performed well in excess of the overall market return in 2012.
For trade ideas and recommendations on how to trade in this market, sign up for a free trial of the D2MX Daily Trading Report, which provides a daily serving of insightful market analysis from the D2MX Advisory team, including:
• Trade ideas and strategies
• Dividend enhancement strategies
• Market scans to watch
• International market analysis, and
• Highlights from the S&P/ASX 200
To request an obligation-free trial, call 1300 610 024 or email email@example.com.
Contact me at D2MX Trading on 1300 610 024 and I can help you trade, using a number of strategies that will give you the tools to navigate this market and help you boost your returns on investment.
Investment Adviser D2MX Trading
This report was prepared by Michael Hevern. It represents the views and opinions of the author. It is not intended for use by any third party, without the approval of Michael Hevern. While this report is based on information from sources which are considered reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect my judgment at this date and are subject to change. Contracting Hevern Pty Ltd is a Corporate Authorised Representative No. 408868 of D2MX Pty Limited ABN 98 113 959 596, AFSL No. 297950 (D2MX), and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd. Opinions, conclusions and other information expressed in this report are not given or endorsed by D2MX, unless otherwise indicated. The information contained in this Report is General Advice only, as the information or advice given does not take into account your particular objectives, financial situation or needs.
Disclaimer: Using leverage to invest can be a two edged sword, as it can magnify your returns when the stock price rises, but will in turn magnify the losses if the trade does not perform as expected.
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