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A bear, a bull and a cat go into a bar...

Friday 31st May 2019

A bear, a bull and a cat go into a bar...

As this is the second instalment of this week’s newsletter I will keep it brief.

The bears have finally gone into hibernation this winter but will they wake up and re-emerge this spring? For anyone wondering, a bear market is a metaphor for falling prices and pessimism (a bear swiping its paw downward), and a bull market is characterised by strong confidence and rising prices (a bull thrusting its horns into the air). Before the federal election with an expected Labor party win the bears were out in force, and then with a surprise Liberal victory the bulls charged and there has been an undeniable improvement in market sentiment.

Following the resounding success of Super Saturday (and subsequent hangover) I just wonder if what we are seeing now is a relief rally. Another metaphor commonly used in the share market is a ‘dead cat bounce’ which is defined as a temporary recovery from a prolonged decline, or a bear market that is followed by the continuation of the downtrend. It is great news that the RBA is likely to cut rates but a follow up question is, why are they considering doing it? Someone I respect very much said to me yesterday that the danger of interest rates near zero means that if there is a geopolitical shock, and the Reserve Bank can’t reduce rates to cushion the blow, then that is a serious concern.

To counter these sobering observations we are now in a politically stable environment and lending conditions are set to improve which can only be deemed good news for the market. So maybe it’s not a bear or a bull, just something in between.

My advice to everyone buying and selling is to stay calm, don’t be greedy, and don’t be fearful. If you find the home that you love and you can afford it, you should buy it, if you get an offer that lets you move forward and complete your plans, you should take it.

Until next week,
 
David Murphy