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Investment Strategy
Wednesday, July 1, 2009
Point of resolve

According to Stanlib, in its June 22nd Weekly Focus, it is decision time for stock markets, having “seen the worst” suggesting buying opportunities should be sought.

It says that after three months of rallying strongly, from 9th March to early June, global stock markets have reached a point of resolve:  either we’re going all the way down again with the bear market intact or markets may spend a bit of time consolidating after the big gains, before gathering steam later in 2009 for the next break upwards.
The JSE All Share Index has now already declined for three consecutive weeks, but so far the All Share Index is just 5.5% below its 2nd June high and back at October 2008 levels  -  also 2006 levels (down 33% from last May’s record high).
Many offshore stock markets, from a technical or chart point of view, have reached what are called ‘resistance’ levels after their big up-moves.
For example, the S&P 500 Index recently reached its down-trend line, which halted its progress.
After the big rally, if it is to rally further and break its bear or down-trend, the index needs to build up a ‘head of steam’ to challenge and break the down-trend. This may possibly take some time, as more positive economic news (like the recent much better US leading indicator) gradually flows through and as the languid northern hemisphere summer months take root.
On a balance of probabilities, however, Stanlib says it “suspects that global stock markets (including our own) have seen the worst and that any pullback, as we’re now experiencing, is more of an opportunity to accumulate equities rather than sell out.”
Good value exists in stock markets, including our own, it says. “For example, the All Share Dividend Yield is still an attractive 4.3% (the highest in 19 years, apart from the past 3 months).”
 

Copyright © Insurance Times and Investments® Vol:22.7 1st July, 2009
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