Monthly Newsletter - January 2010

Editors Note

This edition includes an inspirational quote, a funny picture, a market commentary and main index returns during December 2009, and a feature story. I encourage you to make comments.

World equity markets advanced 5.3% during the December quarter and ended the year on a positive note that most developed nations were growing again supported by improving economic indicators. The benchmark S&P⁄ASX300 Accumulation Index advanced 3.4% during the December quarter.

Inspirational Quote

Failure should be our teacher, not our undertaker. Failure is delay, not defeat. It is a temporary detour, not a dead end. Failure is something we can avoid only by saying nothing, doing nothing, and being nothing.

Denis Waitley (Speaker and Author)

Funny Picture

It's only PAPER MONEY! 

Market Statistics

The table below shows the monthly returns for the main market indices during December 2009:

Market Commentary 

World equity markets advanced 5.3% over the December quarter and ended the year on a positive note that most developed nations were growing again supported by improving economic indicators. Strong growth and economic activity in emerging markets has spurred an increase in commodity prices in tandem with the weaker US$ and low interest rates. Oil prices firmed around $80US pb, with copper reaching $3.3US /lbs and gold hitting historical highs of $1187 per oz. The last 6 weeks of the quarter saw markets begin to take stock of current positions after an astonishingly strong run in the preceding 8 months, fuelled by the accommodative environment created by central banks and governments globally. The main question being asked by investors is the sustainability of current economic activity and therefore, future earnings growth, once the positive effects of the monetary and fiscal stimulus and the inventory cycle begin to unwind.

The US equity market rose by 6% over the quarter (in local currency terms) buoyed by slight improvements in housing, spending, business investment and unemployment numbers. Indications are that the recovery in the US will be a drawn-out affair with unemployment and credit tightness being a major hurdle to improved consumer confidence and spending. In response, the Federal Reserve reconfirmed its commitment to be accommodative for as long as is necessary, by keeping its benchmark interest rate near zero for an "extended period" to spur growth.

Euro-zone equity markets (in local currency terms) posted a gain of 4% for the December quarter with France and Germany leading the way on rising export orders due to the inventory cycle and improved economic activity, particularly in Asia. The Greek market came under heavy pressure due to its fiscal issues and credit downgrading, falling 20.1% followed by Austria (-8.1%) while the UK posted a gain of 6%.

The financials sector declined (-3.3%) with ongoing signals of its fragility. The best performing sector was materials (+11.4%) followed by IT (+8.7%), healthcare (+7.8%), consumer discretionary (+6.9%) and consumer staples (+6.7%). The energy sector posted a gain of 5.8% and industrials (+4.4%) while relatively more modest returns were provided by the telco and utilities sectors with gains of (+4.8%) and (+3.5%) respectively.

Australian stocks gained during the fourth quarter of 2009 as the benchmark S&P⁄ASX300 Accumulation Index returned 3.4%.

The Market Commentary has been sourced from Global Value Investors Ltd and Barclays Global Investors.

Feature Story - 10 Rules for Achieving Financial Freedom (Rule 8)

Follow all 10 rules and you will be on the way to achieving financial freedom.

Rule 8 - Reviewing your investment strategy

How have your investments performed over the past year? Have some done well while others languished? Maintaining large holdings in asset classes or individual investments that are overvalued increases portfolio risks. Rebalancing a portfolio involves selling assets that have become overvalued and buying assets that have become undervalued. This strategy is based on the premise that no asset will consistently outperform and ensures you will not be over or under exposed to any one asset when markets turn.

You should also stress test your portfolio. What would happen to your bank, property or infrastructure holdings for example if interest rates suddenly jumped 4%?

Reviewing your investment strategy is a great way to create more wealth.

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Past Issues

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Important Information

The above information provides an overview or summary only and it shouldn’t be considered a comprehensive statement on any matter or relied upon as such. The above information doesn’t take into account your personal objectives, financial situation or needs. It’s important for you to consider these matters before making any financial decision and I recommend you seek help from a financial adviser.