Overall the outlook remains that most investors should have a pro-cyclical bias within their share investments i.e. resources (companies still not reflecting pick up in commodity prices on historical valuations. See below table), banks as their yield curve (longer term rates) continue to steepen so will banks margins and the industrial sector should see a greater reliance on the January to June profit half unfortunately being aided by no great moves in the Australian dollar. As we move further through the calendar year (and maybe reflected in this reporting season) the focus is expected to move away from the international focus to being more domestic (see recent strong +ve bounce in the NAB business survey) as the period of uncertainty surrounding US policy increases (protectionism over tax and infrastructure stimulus) and potential that the improving global growth starts to fade (started well before Trump and November 9).
Resource company valuations versus longer term scenario:
Marcus Pringle-Jones
Client Adviser.
Bell Potter Securities Limited
Ph: (03) 6281 6206 | M: 0413 164 674
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