Are we in for another mid-year bout of weakness?
Oliver’s Insights presented by AMP Chief Economist, Shane Oliver.
Introduction
After a strong start to the year, share markets have had a few wobbles lately and defensive assets like bonds have rallied again. An obvious concern is that share markets will go down the same path as the last three years that saw the year start off solidly only to see sharp falls in either the June or September quarters led by flare ups in Europe, worries about US growth and fears about China.
From highs around April, global and Australian shares had falls of around 15% in mid 2010, around 20% in 2011 and by around 10% last year.
There are some parallels with the last three years – namely a strong start to the year for shares, followed by a loss of breadth in share market strength both across countries and within markets, renewed Eurozone worries, recent softer jobs data in the US and uncertainty about China.
So its natural to wonder whether markets will follow the same pattern again. And will it be more like 2010 and 2011 which proved to be tough years or 2012 where markets picked up strongly after a milder mid year correction resulting in a strong year?
