I welcome you and your family to 2014, I hope this will be a prosperous year for all investors. 2013 was the best year for share market growth since 2009.
The years 2012, & 2013 were good years for Investors, particularly those who have taken advantage of Dollar Cost Averaging (DCA). In January ’13, the S&P/ASX 200 Index was circa 4700 pts, compared with 31 December ’13 when the same Index reached close to 5400 pts (15.1%).
Some key considerations for Investors in 2014:
- Earnings growth must drive share price uplifts
- The past couple of years has been about cost cutting for listed firms, it is now time to increase earnings through increased productivity.
- Commodity prices should hold steady given that lessening demand has already been built into mining share prices.
- Government plans for Infrastructure development should help our economy
- House pricing and low interest rates should also flow into company earnings.
- Shares based on the pick-up in Australia should trade well in 2014: IAG, Harvey Norman, Boral, Lend Lease, Toll Holdings, 21st Century Fox, etc
- Most analysts say: go overweight in equities, and underweight in Bonds. The 7% early December correction in the market represents a buying option
- The local market is still trading on an average price-earnings ratio of 14.5 times, which is quite attractive.
Value of the AUD$ in 2014?
- US Fed tapering of Asset purchases must be considered in any conversation of the value of the AUD$
- Asian markets should rise nicely in 2014 following sluggish performance in 2013. Special mention of Japan, and Abenomics should also be made as a possible Investment opportunity
- European markets may be slow growth oriented this year due to Bank sector contraction, a lack of strength in the economic recovery, outside of Germany, etc
- AUD$ should stay around the 86-88c range which should assist exports, and earnings growth in some shares.
Summary for 2014
- To continue rising, the Australian share market must continue to climb by way of earnings lifts.
- Since 1983, the Australian share market has risen circa 11%, if this trend were to continue, then the ASX would be close to 5900 pts in twelve months.
- In 2012, PE ratios were circa 10 times earnings. This PE ratio is now trading at 14.5% times earnings – earnings growth is the key to a sustained share market rise.
- The 7% market correction in December should provide a DCA opportunity
- DCA still holds one of the best approaches to wealth creation.