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Just one cautionary: we are into the 6 th year of the bull market (possibly the 8 th innings of a 9 innings bull market, to compare it to a baseball game), so one needs to bear that in mind. One would therefore be more cautious than if we were only in the 2 nd or 3 rd innings of the bull market. One or two market-letter writers have pointed out the statistics relating to the 3 rd year of a US Presidential cycle, which started for President Obama on 1 st October. The 3 rd year has since the 1930’s so far has never produced a negative stock market total return in the US (including dividends) and in fact has produced returns way higher than years one, two and four. Hopefully that statistic continues to play out. Usually most of the returns occur between October and April. Of course, one cannot rely on this happening (3 rd year doing so well), but it is an interesting factor that does encourage the bulls among us; and why not? Credit Suisse’s latest Global Equity Strategy, written by Andrew Garthwaite, notes that US director buying of their company shares has recently been strong, which is positive and net speculative positions on the S&P 500 Index in the US are close to a three year low, which is also a good sign for equities being close to the bottom. Meanwhile ongoing excess liquidity remains good for equities. How about Bonds and SA Listed Property? As is fairly customary during a stock market correction, bonds improve as yields decline and prices rise. Investors sell out of the riskier equities and buy bonds. This time investors are emboldened to buy bonds on the back of news of weak growth in many regions, along with lower inflation, a typically good combination for bonds. Offshore bond yields have fallen quite sharply, with the US 10-year yield down from 2.49% at end September to 2.28% today, driving prices and values higher. This is the lowest yield/highest price since the “taper tantrum” in June 2013. Offshore property shares have turned upwards by 2.5% after their sharp 6.8% correction and are now down about 4.7%. Our All Bond Index here in SA is up 1.5% in October (yields down) and is up 7.3% so far in 2014. This is positive for SA Listed Property, which is still showing a total return in 2014 of around 13.5%. Other Commentators US MARKET ANALYST ELAINE GARZARELLI Recent US Fed (central bank) minutes reassured that policy is data-dependent and there is no immediate intention to tighten. Members of the Fed were concerned about the effect that weak global growth and the stronger dollar could have on slowing the US economy. Garza’s quants system reading declined to 62.5% from 66% last week, due to the downgrade to neutral of the ECRI leading indicator. This indicator shows potential changes in the economic cycle. Corrections of 4 to 7% are normal during bull markets. Garza’s system still indicates a fair value for the S&P 500 Index some 24% higher than current levels. Her sentiment indicator (bullishness of US investment advisors) declined to 45.5%, but is only neutral, not yet bullish for the market (contrarian indicator). She likes the US economy, with only housing restrained due to slow household formation, but expects it to stabilise over the next year.
BCA RESEARCH Conventional wisdom has it that a strong dollar undermines US equities and vice versa. BCA, however, expects a period ahead when both the US dollar and US equities appreciate, albeit with substantial volatility. The dollar is still extremely overbought though, so it could have a period of sideways movement or even some contraction relative to the euro etc. US equities should outperform global equities over the next 6 months or so. BCA still expects US equities to outperform US bonds and cash. Paul Hansen Director: Retail Investing
Page 1 and 2: 13 October 2014
Page 3: Newsflash Pessimism on world market
Page 7 and 8: Weekly Market Analysis Currencies/
Page 9 and 10: STANLIB Extra Income Fund Effective
Page 11 and 12: Equity Financial Markets Fixed Inte
Page 13: Disclaimer The price of each unit o

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