Nov 01 2009
Have Australian Shares Peaked For 2009?
The Australian Stock Market has had a stellar run since the lows in March. The All Ordinaries Index has risen more than 50% since March this year.
Growth in share prices obviously can’t continue at that rate indefinitely. The market will either have to level off for a period and return to its long term growth rate, or perhaps pull back.
My concern is that if share prices begin to fall, we may see profit takers trying to lock in profits from the recent rally. This in turn might evoke in investors those horror memories of the stock market collapse of last year and early this year. Investors may look at their portfolio and say I’ve managed to recover some of my losses from the past couple of years. I might as well sell out now before things get nasty again.
I know I’m over-simplifying things here, but hopefully you catch my drift. The world’s stock markets are largely driven by investor sentiment, by fear and by greed. I don’t think it would take much for panic to surface again. We have had some relatively large price swings in the past week. This volatility lends credence to my fears.
However for long term value investors, a pull back in share prices would not be all bad. Having recently sold down on a couple of positions where the valuations were becoming a little stretched, I have some cash looking for a home right now.
