Aussie investors are confident of getting a return of 5-10% on their investment and that has boosted the price of some of the more expensive stocks.
The key to the surge in prices is the return to diversification, with the focus on high-value assets such as cash and bonds.
But with the economy still in the early stages of recovery, many investors are still waiting to see how much of the rebound will be sustained.
The latest Australian Bureau of Statistics figures show that the overall Australian stock market index closed down 0.2% in the fourth quarter, from a record high of 3,621.6 points.
It is down 0,8% from the previous quarter, but still up over 10%.
Investors are taking note of the strong fundamentals and are confident they can take advantage of the recovery to reap the returns they expect.
“We’re still in a good place.
We’re seeing very strong growth, so we’re going to see more of a return to that and then it’ll turn around,” said Mr McAlpine, chief investment officer of Capital Economics, a property and property investment advisory firm.
He believes the rally will continue.
“The underlying fundamentals, that is the economy, growth, inflation, interest rates, is very good.
And that’s what we are seeing right now,” he said.
“So if we see a bounce back in the next few months, then we can really see an opportunity for investors to buy in.”
Investors are buying into the fundamentals The rally in the stock market has come as a welcome surprise to some investors.
Mr McMalpine says the stock markets have been a big draw for people looking to take advantage.
“What has been so great is the fundamentals.
We have seen a very good run on commodity and consumer spending and that is what is driving these markets,” he told ABC Radio National’s Breakfast program.
“I think the fundamentals are starting to come through a little bit.”
I think the underlying fundamentals are very strong, I think you’re seeing a very strong bounce back.
“But as you look at where we are in the economy right now, and the recovery, the economy is picking up and is on the path to recovery, that’s a very positive sign.” “
When the economy was struggling, many Australians had been looking at whether they were going to make ends meet or not,” he says.
“But as you look at where we are in the economy right now, and the recovery, the economy is picking up and is on the path to recovery, that’s a very positive sign.”
Investors have been buying into stocks and bond markets While the stock and bond market have been hit hard, many are seeing a strong bounceback.
The Australian Securities Exchange (ASX) recorded a 4.5% rise in the first quarter, which is a significant rise.
While the S&P 500 index has dropped by about 4% over the past year, the Aussie Stock Exchange (ASTX) is up about 6%.
Mr McArthur says the strength in the bond market has helped fuel the recent rally in prices.
“Aussie bonds have performed well over the last year, and they’ve done well across the board in terms of their yield,” he explained.
“This has driven up the yields in many other parts of the market, but it’s the bond markets that have performed really well.”
Mr Mcallister said a strong economic recovery was creating a great deal of demand for Australian assets.
“If we look at Australia as a whole, the overall picture is pretty good, we have a very stable, healthy economy and the jobs market is also pretty good,” he added.
“You’re seeing that demand for property and the real estate sector and for real estate being driven by the Australian housing market, so you’re going for those assets.”
Aussie dollar down in recent weeks A strong economy is driving investors to the Australian dollar, which has fallen by about 2% over recent weeks.
Mr Macallister says the slump in the Australian currency is also helping the market and he thinks it will continue to improve.
“People are actually buying the dollars in Australia, so that’s helping the economy in a number of ways,” he concluded.
“It’s helping people who don’t have access to the US dollar in the same way, so it’s definitely contributing to the appreciation of the Australian dollars.”
The Australian dollar has also fallen in recent months, but Mr McAvoy says that was more due to the impact of the global economic downturn than the currency drop.
“That was probably more of an anomaly, and there were some short-term swings, but the overall trend is one of an appreciation of both the Australian and US dollars,” he noted.
“There’s still some uncertainty around the future of the US and the Australian economy, so there’s a lot of uncertainty around what will happen.”
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