The Australian sharemarket started the
year in negative territory. The All Ordinaries Index closed the month 5.9% lower
at 4,596.9 points.
The shaky start to the year was fuelled by profit-taking and mixed United States economic results
during the month. For the month of January the US Dow Jones Industrial Average
Index closed down 3.5%.
We consider it only natural for the market to pull-back
following a fantastic streak in 2009 (increasing by over 50% in 9
months). Importantly, key economic indicators (i.e. US GDP growth) beat most
analyst expectations.
US GDP figures released on Friday were positive. The results
showed that the US economy grew at its fastest pace in 6 years during the last
quarter of 2009. In our view, this confirms that the worst of the economic
downturn is well behind us.
Volatility across global markets rose in January. We expect
high volatility to persist for some time.
Notwithstanding increased volatility, we retain our positive
long-term view to investing in the sharemarket. Dips in the market, in our
view, represent good buying opportunities for long-term
investors.
The RBA board meets tomorrow to discuss interest rates. Most
economists are expecting a further 0.25% increase to the RBA Cash Rate, and
consequently an increase to home mortgage rates.
In currency news, the Australian dollar weakened throughout
January. The Australian dollar is currently buying 87.97 US cents.