The plethora of questions from subscribers is so significant I thought it was time I formally addressed the underlying concern about stocks in 2013.
One subscriber cashed out ahead of the fiscal cliff ballyhoo because he was off overseas on holidays and now wants to know if he should pile back in or wait for a buy-in opportunity.
Another is a potential retiree who is thinking of staying on at work to cash in on the expected run up of stocks, but he wants my thumbs up on the idea.
Now as a financial adviser, what follows cannot be taken as advice as I don’t know the individual circumstances of my subscribers, but let’s just regard it as “enlightened personal investment education”. And I will answer the questions in terms of how I’m investing for 2013.
Stocks to break through 5,000
As a starting point I reckon the local S&P/ASX 200 index will break through the 5,000-level some time this year and I wouldn’t be surprised if it went as high as 5,200 but this is only a guess.
I think a 10% pick up is a shoe in and there are the likes of one-time bear, Matt Kidman of WAM, who would not be surprised if a 20% return bobbed up.
Last year, research ace, Phil Ruthven of IBISWorld said it’s highly possible we could see a bounce back year on the market of 40%, but I won’t be associated with such massive calls.
I’m hoping for 10% but wouldn’t be surprised to see a total return of 20% including dividends.
I suspect there will be a testing of this rally around March when the debt ceiling issue becomes big news in America, but I see these issues as solvable and even the Republicans have recently agreed to accept a higher debt ceiling.
Out of the blue
However, I never underestimate what comes from left-field, but for 2013 with the US and China recoveries looking very believable, money supply being stretched from Europe to the USA to now Japan, with interest rates so low which will make stocks look very appealing, and Mario Draghi, the ECB boss, telling us to look out for a positive contagion, I have to punt on stocks.
Two good years
Deep down I see two good years for stocks and after that I will be checking where term deposit rates are, but for the moment I’m a stocks guy.
This week I hosted a conference where John Noonan, the senior analyst with Thomson Reuters, who is a conservative market expert and who is not long stocks right now, said he thinks our index will beat 5,000 this year.
Given we are around 4,790, that’s a 210-point gain or a 4.4% rise. If we throw in dividends, we could easily gain over 10% in stocks next year. If we crack 5,200, that would be an 8.6% rise, and if we throw in 5% for dividends, there’s 13.8%. And if you’re in retirement with the no tax zone, we’re talking a 15% plus gain for the year.
For my subscriber who wants to work on and build up his super, I think his inclination to roll the dice on super and the stock market makes sense.
As for my cashed out subscriber, timing the market for a correction around May, hoping for the old “sell in May and go away” might pay off but this generality does not always work out. This could be an odd ball year and so getting in and staying in might be the best bet but it’s a gamble and being a timing tipster can be fraught with danger.
I think it’s a dead set goer stocks will rise this year, but on whether the market will have a big fall to create a great buying opportunity, I can only give a definite maybe.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
Also in the Switzer Super Report:
- Gavin Madson: How to earn higher returns on ‘trapped’ offshore funds with two Australian banks
- James Dunn: Battle Royale: AGL vs. Origin – which won’t shock you
- Andrew Bloore: Tips to improve the super system the federal government shouldn’t overlook
- Ron Bewley: Bread and butter stocks: are WOW, WES and others in the staples sector a buy?