RBA cuts rates and the ASX200 takes off, what now? The RBA cut rates yesterday to 2.25%, the lowest in history

Nicholas Forsyth

Market Matters

RBA cuts rates and the ASX200 takes off, what now? The RBA cut rates yesterday to 2.25%, the lowest in history. Australian equities are simply looking for a new level of equilibrium/fairvalue as they factor in lower rates for 2015. Markets are now looking for at least one more rate cut in 2015 and with Australian 3-year bonds touching below 1.8%. Interestingly, the potential earnings ramifications of a rate cut on the financial stocks are mixed and another reason Telstra should continue to shine. However the current rally in equities has nothing to do with earnings (there a bonus), it's all about relative yield. •I am bullish the ASX200, expecting the market to trade between 5725-5925 over coming months prior to a consolidation. I still think our US friends are close to a major turn as they face rate rises, we are in a very different stage of the cycle. •With large current market moves, a 100 point pullback is likely in coming days/weeks, this pullback should be bought -Stay long high yielding quality stocks as they should continue to surprise on the upside. (VIEW LINK)


Nicholas Forsyth
Director
Market Matters

Market Matters is an online investment and share trading advisory service designed for those that want to take their wealth further. We specialise in advice for active share market investors, including those new to the markets or those with a Self...

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