Time for bounce maybe??Has the sharemarket selloff of 2022 hit a bottom? Some market bulls think so
ByElizabeth Knight
July 11, 2022 — 3.47pmAll of a sudden, there’s a sense of balance emerging in sharemarkets. Against the negative and fearful alarm prevailing over the past six months that the rout in equities will continue, some leading market experts are now predicting that the worst is over.
Trying to predict the future of markets is a hazardous pastime - trying to call the bottom is a kamikaze move. But market bulls have received a bit more oxygen over the past 10 days since the start of the new financial year as the all important US S&P 500 has gained 3 per cent since the start of July.
That puts the benchmark 6.3 per cent above its year to date low in June - and could suggest a line is being drawn under one of the worst six-month periods in sharemarket history.
Of course, it would be foolish to extrapolate too much from a three-week reprieve from falling share prices. There have been a few false dawns this year alone - most notably in March where prices recovered more than 11 per cent over the space of a fortnight only to continue a downward trajectory for the following three months.
The nascent optimism in sections of the market doesn’t mean there won’t be more pain ahead for investors. But it is important to note that traditionally equities markets are a lead indicator or a predictor of what is in store six or nine months later.
Thus markets often rise in anticipation that things will be better down the track.
Plenty of experts are cautious about the outlook for sharemarkets in the second half of this calendar year, and they may yet be proved right. But the question needs to be asked - what will push the market down another leg from here?
There are three interrelated primary drivers of the bear run that investors have endured in the first six months of 2022: fears of inflation (or stagflation), rising interest rates and a global recession.
In a more immediate sense, markets will be responding to the outcomes from upcoming earnings season over the next few weeks, starting with quarterly results in the US.
This is the most significant factor likely to drive the direction of equities in the near term.
Yet lower absolute earnings won’t necessarily drive a negative reaction. This is because investors have already factored in lower earnings per share outcomes for many businesses.
Earnings will need to come in below these diminished expectations to jar investors to engage in a major sell-off. That said, this outcome is still very possible and opinions differ wildly.
Expectations also come heavily into play when it comes to interest rates, inflation and recession.
During the first six months of this calendar year markets had to adjust to the reality that central banks had to implement policies to tame serious inflation using monetary action to quickly and radically increase interest rates.
In the US, investors have already factored in at least two 75 basis point increases and even a couple of 50 basis point hikes before taking a breath to see the effect on inflation.
The bull market school of thought doesn’t necessarily take the view that inflation has peaked - some think it has while others feel that it is close to peaking.
Wall Street’s well recognised guru economist, Evercore ISI’s Ed Hyman has assembled a large package of evidence that inflation in the US is beginning to ease - chief among them is a softening in many commodity prices over the past couple of weeks including oil, copper, wheat and corn. This, he says, reduces the fears that oil prices will reach $US150.
In the US he noted that there was an expectation from a recent survey of car dealers that prices would be flat over the next six months while there are already signs of price weakness in the housing market.
In Australia, RBA governor Philip Lowe has forecast that inflation will peak by the end of this calendar year. While Australian economists have adjusted their forecasts for rate rises, the market still believes the RBA will need to raise more than Lowe is suggesting.
In Australia we are already starting to see the signs of a housing price slowdown.
Meanwhile, even if the market optimists are correct and the general trend will be up, investors will undoubtedly feel bumps along the way as various economic data is delivered and interpreted.
The next test from the US will be on Wednesday when inflation data is released.
The strong US employment numbers out of the US last Friday were viewed positively as a sign the economy was less likely to fall into recession.
It would just have easily led to concern that this could lead to wage growth, stronger inflation and increased chances the US Federal Reserve could go harder on interest rates.
- Forums
- ASX - By Stock
- LKE
- LKE towards TOP-5
LKE towards TOP-5, page-9629
-
- There are more pages in this discussion • 14,513 more messages in this thread...
You’re viewing a single post only. To view the entire thread just sign in or Join Now (FREE)
Featured News
Add LKE (ASX) to my watchlist
|
|||||
Last
3.7¢ |
Change
0.000(0.00%) |
Mkt cap ! $61.73M |
Open | High | Low | Value | Volume |
3.7¢ | 3.7¢ | 3.6¢ | $62.76K | 1.700M |
Buyers (Bids)
No. | Vol. | Price($) |
---|---|---|
15 | 740342 | 3.6¢ |
Sellers (Offers)
Price($) | Vol. | No. |
---|---|---|
3.7¢ | 254219 | 3 |
View Market Depth
No. | Vol. | Price($) |
---|---|---|
15 | 740342 | 0.036 |
21 | 1549140 | 0.035 |
15 | 1630562 | 0.034 |
27 | 1756945 | 0.033 |
29 | 1621736 | 0.032 |
Price($) | Vol. | No. |
---|---|---|
0.037 | 254219 | 3 |
0.038 | 146000 | 3 |
0.039 | 203067 | 2 |
0.040 | 644537 | 6 |
0.041 | 744713 | 3 |
Last trade - 16.10pm 09/09/2024 (20 minute delay) ? |
Featured News
LKE (ASX) Chart |