World's prowling bears eye Chinese banquet
There are many investors out there who will be glad to see the back of 2011.
It was a year that saw the return of the bear, with the market peaking just shy of the 5000 barrier on the ASX 200 Index in early April, and then grinding downward for the remainder of the year.
So what were some of the highlights of 2011 on the ASX?
Two big events rocked the ASX this year, starting with the Fukushima nuclear disaster in March.
I remember being at the Wagin Woolorama on the Friday afternoon when the first snippets of news started to flow through about this tragedy.
It was as the beginning of the end for some of the uranium stocks on the market for 2011, led by Paladin (PDN), Bannerman (BMN) and Peninsula Energy (PEN), with the majority of uranium stocks not going close to revisiting their pre-Fukushima highs for the remainder of the year.
The second event was one of the wildest days I've seen on the market in my time in broking, and a day I hope never to see again.
It was Tuesday, August 9.The market had been falling heavily for five straight days and was hanging onto the psychological 4000 support level by a thread - a level it hadn't seen in more than two years.
On Monday night the US markets tanked to the tune of 3 per cent and when the ASX opened on Tuesday morning it was down heavily, bottoming out at 3765 within the first hour under a wave of selling, before bouncing to close above the 4000 level for a 7 per cent intra-day swing.
There aren't many days you feel sick in the stomach watching the market, but this was one of them.
This violent volatility will be something that 2011 is remembered for, and as investors become more educated, and short selling stops being a tool solely used by hedge funds and enters into the repertoire of the everyday investor, then it's a trend that we will continue to see well into 2012.
So where does that that leave us in 2012?
I see the year panning out in three parts.
The first quarter of 2012 will be a continuation of the US and European debt issues that plagued the markets for the latter half of 2011 as these countries and governments slowly develop solutions to manage their current fiscal woes.
There will be a raft of government spending cuts coming out of Europe, which is a necessity for them to get control of their spiralling debt, but will see economic growth in this region grind to a halt as government spending is what currently drives these economies.
The European debt issues won't last forever, and once a tangible solution is developed and they have kicked the debt can down the road once more, then all eyes will turn to China.
What type of tangible debt solution am I talking about from Europe?
I think the European Central Bank will start the printing presses against the wishes of Germany and the EU will inflate their way out of trouble. It won't be a happy solution, but at this stage I can't see any other way that doesn't result in mass default and economic chaos.
Moving onto China, we are already starting to see some wobbles in the growth figures in China, and I think 2012 will be the year that China is put under the microscope and we will get a clearer picture of exactly what is happening in the world's second largest economy.
This has huge implications for Australia and market leaders BHP and Rio Tinto, so any wobbles in China, or a continuation of falling commodity prices, will see some pressure applied to the resource industry in Australia.
Moving on from this, the second half of 2012 will be a lot more prosperous than the first half as we start to see a light at the end of the tunnel.
So my strategy for 2012 is to protect your capital early, and start looking for opportunities once some of the unknowns talked about above are taken off the table.
·If you would like to subscribe to Cameron Bartram's weekly market update, contact him at Sentinel Stockbroking on 9225 0028 or email email@example.com
_Information contained in this article does not consider your personal circumstances. You should consult a stockbroking professional before making any investment decisions. Sentinel may hold positions in stocks discussed from time to time. _
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