Are we heading towards the Boom Phase?
The Australian sharemarket is putting in one of its best years yet with the All Ordinaries Index currently at 5,819 and looking to power up over coming months towards 6,000. Improving company earnings and another interest rate cut by the Reserve Bank to a 2% cash rate is likely to be a further trigger to send the index higher. We don’t actually reach the Boom Phase until we surpass the all time market high.
To understand the process, let’s go through one full cycle.
At 12 o’clock, it is boom time. At 1 o’clock interest rates are rising. By 2 o’clock share prices start to fall and by 3 o’clock commodity prices are decreasing as unemployment levels begin to increase. From 5 o’clock, real estate begins to feel the pinch and at 6 o’clock the country is in the grips of recession. At 7 o’clock the United States Federal Reserve and Reserve Banks around the world begin to cut interest rates to kick-start economies and by 8 o’clock share prices begin to rise. Commodity prices perk up at 9 o’clock. Between 10 o’clock and 11 o’clock … Read More »