Australian Investment Blog

The ECB's hint of stimulus send equities roaring! Good morning everyone, Overview Last night ECB (European Central Bank) President Mario Draghi literally ignited world equity markets as he said "policy makers will investigate fresh stimulus measures to thwart downside risks to the growth and inflation outlooks". Perhaps our comments in yesterday’s report will be proven portentous? Adding to the positive sentiment were US earnings. As previously discussed, earnings expectations have been extremely low and beating them is proving relatively easy. Of the companies that have reported to date 44% have exceeded sales estimates and, importantly, 74% have beaten profit projections improving confidence in the strength of corporate America. In a broad-based rally 9 of the 10 major groups comprising the S&P500 gained, with the Healthcare-care stocks being the only weak sector falling 1%. This relative weakness in the Health Care Sector, a sector that has been very strong over recent years, was predicted in recent Market Matters’ reports. We see the maturity of the Healthcare sector influencing investors to put their uninvested cash into what have been the underperforming sectors in the search of better returns. Thus in relative terms we don’t expect a lot of new cash into this sector thereby tempering its relative growth. Turning to the Markets The Elliott Wave count remains firmly on track for the US / German equities to target fresh all-time highs in coming months as we enter what is seasonally the strongest period for equities. - see charts 1-3.
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