Is the Glass Half Full? Is it time to Get Back Into Equities?

For those who are sitting on cash in their super funds. Here is something to ponder.The S&PASX 200 still has to gain more than 60% before surpassing its pre GFC highs. This may sound like the glass is half full, so call me an optimist.

The big question is when will it get there?

History has told us that it could get there within 8 years, looking back at some of the major downturns in the markets this is what happened. After the stock market falls of October 1987 and early 1988, the market rallied 50% and then double dipped in 1990 testing its previous lows. Does this sound familiar? After a poor start to 1991 the market then rallied for the next 5 years.  No it wasn’t a straight line up, there were bumps along the road.   The chart below shows the ASX 200 over the last over 5 years, the tail end has averaged out so the opportunity is in the next part of the tail.

5 Year Chart - Provided by asx200.com

How will our market get there?

Let’s keep this answer simple. Cheap money.  This will largely depend on further easing in our monetary system. The Americans are enjoying cheap borrowing rates and their markets have practically achieved their pre GFC highs already. If our market suffers further falls due to overseas shocks or huge job losses in Australia, then any decrease in our market will force the RBA to drop rates further thus creating cheaper borrowing costs. We are seeing a downward trend on inflation, so my prediction may not be far away and of course being an opimist is my forte, I say let the bulls back in!

Phillip Adamcewicz is an avid share investor qualified accountant and advisor, he is the director and licensee of A2Z Securities.

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