under performing, page-16

Theres good reason why the XJO is down so much over 2011.
Commodity prices have fallen over the year due to forward looking demand forecasts (level to falling). Uncertainties in global markets/debt markets saw the AU$ rise at the start of the year (the start of big money looking for high return safe havens). That stopped mid year and most money recently (last 6 months)has been pulled from most markets and put into US treasuries/German Bunds.
Add to that, the XJO is made up of mostly resource and banking stocks: Banks have been caned worldwide. Resources have dropped due to commodity prices falling. Accordingly, the XJO is down. Of the 200 Co's in the XJO, about 20 have any real impact with BHP,BANKS,WPL WOW making the most impact.
Looking forward at some point the banks will find support and if commodity prices turn upwards then bhp, rio will find support and propel the XJO upwards.
Reminds me of end of 2002 with people wondering if things would turn around. A year later find managers were kicking themselves for not buying stocks like BHP and RIO. The market didnt turn until APr 2003 which is likely scenario for next yr.
My reason being that recessionary outlooks going forward should be confirmed by poor economic data for the 1st Qtr 2012. Unless data between now and then confirms a worse outlook for the 2nd Qtr 2012, the market will be rising on the expectation that the 1st Qtr will be the worst one and things going forward seem better.
THis is yet to be confirmed and will take 6mths to do so. THerefore the next 3 to 6 mths of data will be crucial to determining if we are at the bottom of the current downtrend or whether on balance, global economies can show signs of growth going forward. If on balance it seems growth is slowing/stopping/negative, then stock markets and esp the XJO will keep falling.
IMHO we are possibly getting close to a bottom. Possibly.
Some improvements in EU debt markets have helped. Still a way to go (3 to 6 months?) fits with the above.
Time will tell.
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