A sign of the economy’s good health is the largess distributed in Treasurer Scott Morrison’s recent budget, without wrecking the fiscal balance sheet. Net Debt is projected to peak at 18.6 percent of GDP in 2017/2018, with the budget returning to surplus in 2019/2020.
Source: Budget.gov.au
The ASX 200 is testing resistance at 6100/6150 despite the weakening Australian Dollar and troubled banking sector. Breakout above 6150 would signal a primary advance.
Led by the ASX 300 Metals & Mining Index. Breakout above 3800 signals a fresh primary advance, with a medium-term target of 4200.
But the ASX 300 Banks Index is in a primary down-trend, having broken support at 8000. Retracement that respects the new resistance level at 8000/8100 is likely and would confirm a primary down-trend with a medium-term target of the 2016 low at 7200.
We have a bi-polar economy, with Resources exports surging, along with Services and Rural (agriculture). Manufacturing exports are the only flat spot.
But the banking sector faces challenges from a threatened housing down-turn, with near zero house price growth, and a regulator racing to shore up bank balance sheets before the bubble bursts.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He founded PVT Capital (AFSL number 546090), which provides income and growth strategies to wholesale clients.
Colin also co-founded Incredible Charts and writes the popular Patient Investor newsletter.
Using a top-down approach, Colin identifies macro trends in the global economy and then combines fundamental and technical analysis to evaluate opportunities in sectors that stand to benefit.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.