Download It`s the last one for the year, and it`s time to reflect

ISSUE 60: December 2010
It's the last one for the year, and it's time to reflect...
In the run up to Christmas markets in general have been very quiet. In some ways the lack of liquidity in
markets is adding to the volatility. Nonetheless it was still a fairly good week for the JSE last week. We
did underperform the international markets but a gain is a gain.
The All Share was up by 0.36%, industrials were up by 0.51%, financials gained 0.19% and resources
were up by 0.32%. The gold index lost 0.95%. The rand remained strong but gold did see some profit
taking as the dollar was quite strong on European debt fears.
Looking back into 2010
I thought that this week being the last blog for this year we would look at how the market behaved
during 2010. In reviewing my blog, I see that in some ways things haven't changed that much in terms
of what is going on, although share prices are a lot higher.
January followed a huge Santa Claus rally in December 2009 where we saw the JSE All Share gain
10%. When looking at P.E. ratios they reflected that share prices were not cheap especially in the light of
a 30% gain for 2009. We saw the first moves by the Chinese to tighten monetary policy which scared
markets a little.
February saw the US produce fantastic growth numbers albeit off a low base with GDP at 5.7%. News in
Europe however was not that great with deficits in the P.I.G.S. starting to raise concerns about sovereign
debt. Markets in general ignored the bad news and ended higher.
March saw markets start to look pretty good on a technical basis. This was supported generally by better
earnings out from companies. Economic data also started to turn from being rather downbeat and this
helped the market to gain some momentum as risk appetite picked up. The markets moved to post crash
highs and we were helped by a 50 basis point cut in rates.
April saw an improvement in US jobs data and data in general began to get on a roll. This was good for
commodities and sentiment was really up beat. Gold was making new highs and GDP forecast for the
local market were upgraded. For the first time the recovery started to look sustainable although I did
warn of the prospects for a correction in markets.
May started on an iffy basis and in the second week the JSE All Share lost a massive 7.6%. It proved
to be a tough month that wasn't helped by the flash crash in the US. We also saw the "bond vigilantes"
start to circle the bond markets but by month end some stability returned to the market.
The EU bailout package helped that stability and with the Soccer World Cup upon us sentiment kicked
up another gear. A pickup in inflation in China did keep markets grounded although gold did move to a
new record high above $1260.00 an ounce.
July was very quiet on the local market as we all got into the swing of the World Cup. Technically the
markets entered a dangerous position with a negative head and shoulders pattern scaring investors.
History repeated itself as the market bounced sharply off the neck line of the head and shoulders
pattern. Some of this bounce was due to the release of European Bank stress tests which on reflection
now proved to be a total farce.
August started with global investors being a lot more vocal about the prospects of investing in emerging
markets. We basked in the glory of the World Cup but the markets couldn't keep up the pace and
August proved to be a bit of a shocker as the JSE fell for 5 weeks in a row.
September is usually the worst month for markets, but how bad could it get after a horrible August?
Fears of a double-dip recession abated somewhat and sentiment picked up all over and things started to
look really good. We began to see momentum having a big influence on markets as they continued to
run far ahead of valuations and talk of QE added to that momentum. Gold fed off the fears of the effects
of QE and we saw it make a new record high above $1300.00 an ounce.
October shone the headlights on the problems in Ireland and we saw more and more talk about currency
wars. On the local front we saw Wal-Mart make a bid for Massmart while the HSBC bid for Nedbank fell
apart. Resource counters were very strong and in spite of a strong rand. The JSE All Share reclaimed
the 30 000 point level as the JSE went on a run that lasted 7 consecutive weeks.
November saw economic data out globally that generally looked pretty good but sovereign debt issues
were back in focus with Ireland being bailed out and the "bond vigilantes" out in full force. Markets were
nervous but in general they did make some headway although the JSE did underperform its international
peers.
December has seen a continuation of November's pattern. Friday saw the US markets close at 52
week highs. This week we go into a futures close out which I always say is a bit of a lottery in terms of
direction for the close out. I am sure that fund managers will want to see the year out with more gains
but some high inflation data out from China may well rain on their parade. The overriding factor in
markets at the moment though remains momentum and until that turns it is hard to fight the trend.
Till next year be patient, be aware and trade well.
Greg Volkwyn
Get up to 1GB FREE ADSL data EVERY MONTH!
Did you know that you can now INVEST in SHARES ONLINE for LESS?
Sign up for FNB Connect Surf (an easy, pay-as-you-use internet ADSL bandwidth service) TODAY you
can get up to 1GB worth of internet bandwidth EVERY MONTH absolutely FREE*!
What better excuse to spend extra time ONLINE and INVEST more with Share Investing from FNB?
To sign up for FNB Connect Surf, click here NOW
Terms and Conditions apply
© Copyright 2010. First National Bank - a division of FirstRand Bank Limited.
An Authorized Financial Services and Credit Provider (NCRCP20)
Terms, conditions and standard rates apply.