Market Wrap

One day the sharemarket is up, the next day it’s down. This may seem like a normal situation, but the bulls and bears have been actually been embroiled in this tug o’ war for a number of months now with no sign of a winner emerging.

At the heart of the issue are the divided views on the economy. Some believe that the US economy will slip back into recession – the so-called ‘double-dip’ recession.

Others just believe that the economy is taking time to find its feet again after the biggest downturn since the Second World War.

Of course many would ask what that has to do with Australia. Our economy is in good shape, we’re more dependent on China, rather than the US, and Aussie company balance sheets are in good shape.

But at the end of the day Australian shares represent around 2-3% of world sharemarket capitalisation and over 40% of our shares are held offshore, so global trends will always be important for our market.

If you want to know the winner of the bulls versus bears battle watch the US job market – that will prove fundamental to the ‘double dip’ debate.

Stephen Karpin

Managing Director

CommSec Research Insight – 2 September 2010