Market Conditions Improving?

That is the big question. As many of you are aware I made a number of predictions last year as regards how the credit crunch would pan out.

1. I stated I felt oil prices would collapse by the end of 2008.
2. I indicated inflation would collapse shortly after that.
3. The credit crunch would ease in the Spring of 2009.
4. Markets would start to improve by the end of the Summer 2009.

So how did I do?

Well I got it right on the oil issue… the ridiculous oil price was never sustainable as there was no real reason for the it shooting up to those highs. However, take it from me we will have a higher permanent base price in the future for oil in my view so do your bit and buy a woolly jumper and turn of the heating. $25 to $30 a barrel is probably going to be a thing of the past.

Inflation has now collapsed thanks largely to the oil price and onset of recession.

The credit crunch has arguably eased, since the end of March 2009, although the banks are very picky about whom they lend to and the rates of interest are high compared to where they should be noting the base rate. Take it from me, some of the banks will announce strong profits of the next 12 months, the banks that is that were not exposed to the bad debts. Those that were will recover quickly in the coming period with early results indicating this is already happening.

The market hit a probable bottom (dare I say it!!) in March at around 3500 points for the FTSE. It now sits at 4678 points at the time of writing. That is growth of over 30% in just 5 months.

I was probably right with my suggestion in May that the apparent rise in the market was a bear market rally as opposed to a sustainable stock market recovery. It settled back in early July but has risen sharply since then.

Is it now likely to be the start of the recovery? Lets put is this way, with more positivity out there (ie apparent property market recovery, improved results from some Companies, less of Robert Peston on the news!!), as the banks improve and become willing to lend, then this gives business the opportunity to operate, grow and employ more people. This means growth potential in shares and markets as a whole.

My gut instinct is that I am confident we are in some form of recovery already. Clients that invested in ISA in March / April and since then, as I recommended have enjoyed strong gains already. I think it will continue to be a little rocky over the next 2 years but steadily and surely a recovery should be sustainable.

Looking long term the gains are still there to be had, as long as investors continue to monitor their holdings and review matters regularly, they should profit handsomely. Of course there are no guarantees.

Regards

Adam