Thursday 24 January 2013

Editorial: A Whiff of Optimism for 2013

I'd rather walk on broken glass than raise trader's hopes unreasonably, but sitting on the fence isn't attractive either and, whilst nobody is forcing me to make a prediction, I'm going for an optimistic outlook for 2013. There are a few reasons.

Firstly, the Australian share market has reached its highest level in 20 months. The general outlook for our share market appears to be bright. For some commentators it is simply because a positive start in January generally translates to a positive year. For others it is because lowering interest rates make shares more attractive and as investment money flows into shares, their prices go up. Either way, I'm claiming a positive trend.

Secondly, our latest inflation rate has come in below expectations. That makes the chance of an interest rate cut more likely. Now, recent rate cuts have done little for consumer confidence but I am banking on a cumulative effect that will finally convince consumers they can loosen the purse strings just a little.

Thirdly, consumer confidence is marginally stronger. For three months in a row optimists have out-numbered pessimists whereas, for 14 of the previous 16 months it was the other way around.

I think all that justifies a whiff (a small amount, tinge, touch or smattering) of optimism. Let's hope I'm right.