The good times continued in April for the Australian sharemarket.
The All Ordinaries Index closed April 6.0% higher at 3,744.7 points. While global shares experienced the best monthly result for two decades.
Stabilising, and in some cases, improving economic data, led by consumer sentiment, housing and business sentiment, were the major economic drivers of Australian and global markets over the month.
Swine flu emerged as a potential major risk factor for global markets, particularly in the transport sector. While this has the potential to derail the recovery over the coming months, the scale of the pandemic is not yet clear.
The All Ordinaries Index is now in positive territory for the year, up 2.33% year-to-date.
Looking forward, we will have plenty to consider during May:
Most significantly, the Federal Budget will be released on the 12th of May. It will be a case of goodbye budget surplus.... hello budget deficit! However the magnitude of the budget deficit is uncertain. The Budget should provide clarity on key issues such as scheduled tax cuts, the First Home Owners Grant, welfare payments and any further economic stimulus packages.
The RBA board meeting is tomorrow, with several economists mixed on whether or not there will be any further rate cuts. With the major banks not passing on the full April rate cut to borrowers, further cuts may do little to stimulate the economy.
The US government bank “stress test” results will be released in May. It will be interesting to see how the US government handles these results and if any government intervention is required.
We remain with our cautiously optimistic view of the short-term performance of the sharemarket. For those investors with time and money on their side, now may represent an excellent buying opportunity.