Despite better than expected profit reporting by Australia's major companies, the direction of the Australian sharemarket is still cloudy, says Dr Les Coleman. "In the last few months the stockmarket reached a low in March but has rebounded almost 50% since then. In fact its gone back about 40% of the way to its previous high in 2007."
"Generally coming out of a bear market it takes two years or so to get that kind of recovery, so the market has gone a long way very quickly - up 25% for the year already - so while it's been a very very strong recovery, that rate of increase is simply unsustainable."
"Theres an old saying in financial markets: buy the rumour, sell the facts. And I think we're going to see a re-evaluation of the market, and that it won't really go ahead so strongly in the next few months."
"Typically coming out of these mini bull periods the market falls back about 10% and that would bring back the rate of increase to 15% this year, to about 20% for the year as a whole. That's a fairly normal rate of increase coming out of a deep bear market like we’ve seen, so a 10% correction now and a bit of recovery later in the year is what you’d expect."