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What will 2011 bring?

10 Jan 2011 15:31Peter Waring

A quick recap of 2010

My predictions for 2010 were pretty much on the mark. The NZ dollar traded mostly in a range between 70-75c to the USD, with the odd foray higher and lower, for short periods of time. The equity markets rallied early in the year then entered a sizeable correction during the Northern Hemisphere's summer.  The housing market was flat to slighty down. Overall it was a lacklustre year with no real gains being made or losses either for that matter. Without the US government's QEII program we would be looking in much worse shape.

Where to in 2011?

In 2011 I can see:

1) An early rally in the stockmarket until late March or April, then a summer correction, then possibly another rally late in the year. I believe we are back to the traditional patterns of trading (buy in the Fall, go away in May).

2) The NZ dollar will gain strength against the greenback, but will still struggle to march past the 80c mark. NZ is teetering on the brink of a double-dip recession and this is going to keep the currency necessarily depressed for some time. But the US economy is struggling too, so relative to each other, they will stay about the same.

3) The NZ housing market will show further weakness until later in the year. The low sales volumes we have been experiencing are a sign of further falls in prices to come. The correction in prices will not be massive however, we are talking only a few percentage points if that. This is due to the sales volumes of higher-end properties dragging the median prices up.

4) The Rugby World Cup will fuel some optimism in the local equity markets (in stocks like THL and NZO). This optimism will fade once the fans leave and winter truly quicks in.


I am staying long equities but will review this sometime in late March and early April. With property investing, now is the time to put in some cheeky low offers, if you have the required deposits that the banks are asking for. The greatest irony is that the best time to buy is always when people have the least cash and finance is the hardest to get. So therefore it lost on most people as most people cannot get finance to snap up the bargains as they come along. I don't predict any massive rally, but I can't see any major correction either, bar some unforseen event (such as a war breaking out). If the US government implements QEIII, we will see a further rally in the equity and commodity markets.

Happy investing!


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