Economic improvement supports stock market

Economic improvement sup

By ARIE TAL
September 24, 2009 18:01
2 minute read.

 
X

Dear Reader,
As you can imagine, more people are reading The Jerusalem Post than ever before. Nevertheless, traditional business models are no longer sustainable and high-quality publications, like ours, are being forced to look for new ways to keep going. Unlike many other news organizations, we have not put up a paywall. We want to keep our journalism open and accessible and be able to keep providing you with news and analyses from the frontlines of Israel, the Middle East and the Jewish World.

As one of our loyal readers, we ask you to be our partner.

For $5 a month you will receive access to the following:

  • A user uxperience almost completely free of ads
  • Access to our Premium Section and our monthly magazine to learn Hebrew, Ivrit
  • Content from the award-winning Jerusalem Repor
  • A brand new ePaper featuring the daily newspaper as it appears in print in Israel

Help us grow and continue telling Israel’s story to the world.

Thank you,

Ronit Hasin-Hochman, CEO, Jerusalem Post Group
Yaakov Katz, Editor-in-Chief

UPGRADE YOUR JPOST EXPERIENCE FOR 5$ PER MONTH Show me later Don't show it again

The global macro arena keeps producing encouraging economic news. The improvement of the business sectors and the rising consumer optimism support stock markets around the world which continue their positive momentum. MSCI World Index rose by 66 percent after reaching the bottom point on March 9th this year. Tel Aviv 25 index (Maof) followed the worldwide trend and added 55 percent since March and 68 percent from its lowest level that was reached on November 23rd, 2008. Furthermore, the trading turnover returned in the last week, after a short-lived recess, as more investors allocated additional cash toward stocks, and the index's 1000 points level, which is considered as psychological barrier, is just around the corner and may be achievable soon. "How long" and "how far" became the most common questions among equity investors in the past months due to the intensive and extended rally. There is still a debate about whether this is merely a bear market rally (as happened during the 30's and 70's in the US and during the 90' in Japan), or the start of a prolong upturn in equities. The trend in TASE (Tel Aviv Stock Exchange) will be directly affected by the atmosphere in the global markets dictated by the US leading indices. Looking simply at the US market's trend, the S&P 500 hasn't break yet the upper downward sloping trend-line (see graph 2). Additionally, according to the RSI (relative strength indicator) equities are overbought. The equity market is probably over-extended and the risk of a set-back is high. On the other hand, the index broke above the 200-day moving averages and is approaching 1100 which is another technical obstacle. Breaking this level would be a strong signal that the market rise is not just a bear-market rally. Such a breakout might push more investors and cash to the market. upturn in exports was apparent in the US (the dollar depreciation helped a lot). Continuous improvement of the macro environment will affect positively earnings in the business sector and consequently stocks. However, investors should keep in mind that the credit market has not been restored yet and consumers might suffer from rising unemployment and side effects from the government expansion policies. Thus, economic expansion might be volatile over the next several years and characterized by shorter business cycles. Therefore, equity prices should rise over the next several years but it may not be a smooth path. The writer is Chief Analyst and Strategist at Alumot-Sprint Investment House and also a regular writer for several leading financial papers and websites.

Related Content

The Teva Pharmaceutical Industries
April 30, 2015
Teva doubles down on Mylan, despite rejection

By GLOBES, NIV ELIS