I appeared on Channel News Asia again this morning for my fortnightly appearance, at 8:20am AEST / 6:20am SGT. My questions and my responses in the form of brief notes are below:
Q1. Upbeat technology earnings helped the Nasdaq surpass its 15-year-old record last week. Does this bull market have legs?
I am a believer in the power of trends and the longer it continues, it is likely to encourage more buying. However my only concern is that the other major US indices haven’t enjoyed similar price action in that both the DJIA and S&P500 remain within their established trading ranges and are yet to break higher like the Nasdaq.
Q2. Are we getting a bit vulnerable to a correction?
As much as I believe in the power of trends, they don’t continue forever. Across the world we are seeing major indices are multi-year highs, especially in Asia. The more hype that surrounds these levels, the more likely people will think the best is over and a correction or a major reversal may occur.
Q3. Investors this week will be closely watching the results of the two-day US Federal Reserve meeting. Will the Fed provide clues on when interest rates could be hiked?
The Fed has been quite open and transparent about what they are thinking. Earlier this year we thought June was the most likely month however the odds have lengthened considerably. I get the impression the Fed Officials adhere to a well orchestrated media release plan where they are scheduled to say certain things at certain times. There is even talk now that we won’t see anything until 2016.
Q4. Will Australia’s benchmark index breach the key psychological barrier of 6,000 today and can it stay above that level?
It is certainly poised to do that. The longer it hangs around and continues to pressure the level, the more likely it will occur, as I believe that persistence wears down resistance. If it does break, then the shackles may come off the ankles and the index will be allowed to finally run free whilst the key 6000 level will provide some support if needed.
Q5. Financial markets are now pricing in a 50% probability of an interest-rate cut by the Reserve Bank of Australia at its May 5th policy meeting. What’s your call?
I don’t envy their job as they presently face quite a dilemma. They are receiving a lot of mixed signals – unemployment figures have improved and there is increase in constructions etc, however inflation is a little low and they would be concerned that the Australian dollar (AUD/USD) hasn’t depreciated any further. In fact the AUD/USD reached a one month high overnight moving through the resistance level at 0.7850 which is where it is presently trading. I don’t think they will cut again next week, however I wouldn’t be one bit surprised if they did.