Oliver’s Insights

Oliver’s Insights is a special commentary by Dr. Shane Oliver, AMP Capital’s Chief Economist, on issues and trends affecting the economy and financial markets. Dr. Oliver is supported by a team of economists dedicated to delivering timely commentary and the asset allocation decisions for AMP Capital’s diversified product range.

Oliver's Insights
A terrible year for shares, but better conditions ahead
27 June 2008 (PDF - 561 Kb)

Key points:

This note looks at shares over the last 12 months and their outlook going forward. The key points are as follows:
• Share markets have been subject to a "perfect storm" over the last 12 months. Thanks to the US sub-prime crisis, the oil shock and higher local interest rates, Australian shares look like having their worst financial year since 1981-82.
• While Australian resources shares have boomed on surging commodity prices, the rest of the market has generally slumped on debt concerns and profit worries.
• Shares are oversold and this has been made worse in the case of Australian shares by tax loss selling in the last few weeks. As such, they are due for a short-term bounce which may now be getting underway. However, the next three or four months are likely to remain rough as the economic news remains bleak and as earnings downgrades continue.
• Expect a strong rebound in the December quarter and better conditions over the next six to twelve months as a whole. Shares are good value and will perform better as the bad news abates.
  

Oliver's Insights Archive
How big a threat is inflation? (18 June, 2008) The oil crisis and the investment outlook (10 June, 2008) Why relaxing inflation targets would be bad for investors (28 May, 2008) Shares - is the bear market over? (21 May, 2008) The outlook for Australian house prices (9 May, 2008) Oil prices and the economic outlook (1 May, 2008) What is the risk of a hard landing in China? (28 April, 2008) Commercial property values after the credit crunch (15 April, 2008) Putting negative investment returns in context (4 April, 2008) From financial bust to commodity weakness (31 March, 2008) The share bear market - where to from here? (14 March, 2008) Inflation, agflation, stagflation - what it means for investors (6 March, 2008) The Australian dollar takes off again - to infinity and beyond? (29 February, 2008) Growing risks for the Australian economy (20 February, 2008) Are house prices set to boom following the share rout? (14 February, 2008) How long the bear market – and what are the risks? (1 February, 2008) The share market collapse - what to do? (24 January, 2008) The Indian growth story and opportunities for investors (18 January, 2008) Rising risk of a US recession - time for caution (11 January, 2008)