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Correction time for shares, is the US economy headed for recession?

Correction time for shares, is the US economy headed for recession?

8 February 2018

Elizabeth Timmins, an Advisor of Boyce Financial Services in our Cooma office recently uploaded the following article from Dr Shane Oliver, Head of Investment Strategy and Chief Economist, AMP Capital. 

2017 was unusual for US shares. While Japanese, European and Australian shares had decent corrections throughout the year of around 5 to 7%, the US share market as measured by the S&P 500 saw only very mild pullbacks of less than 3%. This was against the backdrop of a strongly rising trend thanks to very positive economic conditions and President Trump’s business friendly policies. In fact, up to its high a week ago it went a record 310 days without a 3% or greater pullback and every month last year saw a positive total return (ie capital growth plus dividends) which is also unusual. This, combined with a very strong start to this year of 7.5%, very high levels of short-term investor optimism and lots of talk of a “melt up” left the US share market overbought and highly vulnerable to a correction, which we may now be starting to see.

 

In his most recent “Oliver’s Insight” column, AMP Capital’s Dr Shane Oliver looks at the US share market as its long overdue for a correction, the impact this will have on other markets including Australian shares, and the potential for 2018 to be more volatile than last year.

Download the PDF to read the full article by Dr Oliver here.

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