Wry & Dry

March market bounce, but quarter still negative

The March quarter saw Napoleon Turnbull take two steps forward (Senate election reform & double dissolution threat) and then one step back (a noble idea of allowing the states to raise their own income tax, cratered by inept process).  The share-market was the reverse: two steps back and just one forward.  Gloom.

The market fell by 10% from New Year's Eve to Shrove Tuesday [1] .  And then rallied by 7%.

What's going on?  Well, pundits will tell you that its China.  Or Yellen.  Or Europe.  Or the iron ore price.  Or the oil price.  Or the strong A$.  Truth is, the market is skittish.  Aimless.  Trading volumes are thin, so any news, no matter how remote, will push the market one way or the other.

The market is wandering around like a sensible economic policy trying to find a home in Canberra.

Flat line

Australian company profit growth is subdued - and likely, on average, to just beat inflation over the next couple of years.  Dividends, on average, are too high.  And the share-market, overall, remains overvalued: as the quarter closes, a forward P/E of about 15.5 is not the stuff of booming rallies.

It's too early for W&D to give a prediction of how FY-16 will finish (that will bravely be given on Friday 24th June).  But W&D will bet London to a brick that we will have our first negative FY since FY-12.  In that year the market returned minus 7%.  And then returned 20% in FY-13 and 17% in FY-14.