The Australian Stock Market Outlook – “Fair, at Best”
Lance Spicer, Fund Manager, Trident Global Growth Fund, 20 Jul 2011, 4:11 PM
The Australian Market is facing another hard six months with profit downgrades, but there is a way to make money in this market....
The “avalanche” of profit warnings and downgrades from Australian companies has just started with retailers being first. As many of us now know, the Australian stock market is probably the worst performing industrialised market in the world in 2011. The All Ordinaries index was down over 6% for the year as of yesterday. It leaves many investors wondering, “what’s wrong, we’re in the middle of a mining boom aren’t we?” Yes, we are, but we have some rather nasty problems that the politicians would rather not address (or in fact have caused). They are:
- An overvalued Australian dollar knocking the stuffing out of exports (including mined commodities)
- Poor consumer sentiment holding back retail sales
- High interest rates contributing to poor business and consumer sentiment
- Business uncertainty and the loss of profits ramifications of the unpopular Carbon Tax and Mining Resources Rent Tax being proposed
- Concerns of a slowing growth in China
We already have one quarter of negative growth, are we going to see a second and then we’ll be in the recession most people believe we are already in?
Many investors who have money in Australian share portfolios, superannuation or in Self Managed Super Funds would be feeling more than a little unhappy knowing their investments have definitely gone backwards this year.
However, the strong Australian dollar does offer some real benefits for investors who can think “outside the square”. What I’m talking about is investing in overseas shares at the discount the Australian dollar provides. We all know it’s fun to shop in the US for cheap goods these days, but what about doing the same for US shares, such global blue chip companies like IBM, Apple and Google?
Most economists agree, the Australian dollar won’t stay at these elevated levels forever, particularly when you consider the economic headwinds we face that I spoke about earlier. So, acting soon and taking advantage of the dollar is a wise investment choice, particularly when you consider the US market has gone up over 5% this year, while the Australian market was down over 6%.
As an example, in the last 24 hours we have had stunning earnings reports from Google, Apple, IBM and 4 other companies that are held in the Trident Global Growth Fund. In fact, every single Trident Global Growth Fund holding that has announced second quarter earnings has beaten all earnings and sales expectations and has also increased their forward earnings guidance! There are few Australian equity funds that can say that - if any.
The Trident Global Growth Fund is positioned in the “sweet spot” of American corporate earnings and we expect, based on our research, that the next 6 to 12 months will be even better. It’s only very early days for the fund, as it’s just over 6 months old now and our investment strategy is based on the longer-term, like 3 - 5 years. However, as this is the first quarter where we have been “fully invested” it is pleasing that we are starting to see the benefits flowing through now.
You can diversify your portfolio or Self Managed Super Fund into these and other global blue chips with as little as $15,000 and top up with any amount you like any time in the future. I and my family are investors in the fund and I have been regularly increasing my holding, because I know how our holdings are performing and how they’ll be performing in the future. The near term problems of European debt concerns, as well as those in the US, will soon pass and the US recovery will pick up pace as corporate earnings are already indicating. As for the Australian market, well, it could take a while yet.
Find out more about The Trident Global Growth Fund
If you’d also like to learn how to invest directly into US and Overseas shares with safety, you may wish to also consider Trident Confidential, my weekly newsletter. We invest in a diverse range of US and Australian stocks and have achieved an average of 80% per annum since we started in 2005 and this year we are already up over 22% while the market is down 6%.
As you know, Trident Confidential is not just stock picks. It is a proven investing system with full guidance and protection strategies, so you can make great profits whilst keeping risk to the absolute minimum.
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