Oliver’s Insights presented by AMP Chief Economist, Shane Oliver.
Key Points of the article:
- Shares are overbought and vulnerable to a correction. February is often a soft month and current risks regarding Italy, Spain, the US budget and earnings results in Australia may constrain markets in the very short term.
- However, the pattern of rising highs and milder lows since late 2011, reasonable valuations, improving global economic news and easy monetary conditions suggests shares have likely entered a new cyclical bull market.
Since the height of the European public debt crisis in September/October 2011, global share markets are up 32% and Australian shares are up 26%. With the global outlook looking brighter, inflows into share markets seemingly starting to pick up and shares accelerating to the upside over the past few months, an obvious question is whether we have commenced a new bull market? This note focuses on cyclical bull markets, associated with three to fiveyear economic cycles rather than whether we are in a long term bull market which can run for a decade or two.