Pick the currency and pick interest rates and you will pick the market

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Pick the currency and pick interest rates and you will pick the market. At his time last year, when the dollar was in the nineties, the risk of recession in Australia was high. With the lower currency, lower petrol prices and a cut in interest rates you have gone from a 40% chance of recession down to say 20%. The market is doing what it normally does when recessions come off the table - markets rally... The problem is now with interest rates where they are set in Australia and overseas the temptation is to overpay for stocks. You can justify it based on bond yields but from a valuation perspective things look very stretched. And every time you go up a hill you have to come down the other side at some point... We said that pick the currency and pick the interest rates and you can pick the market. So it looks like we have 2% or lower cash rates, a currency going towards 70 cents if not lower. That means that the market probably goes through 6000.

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