29 Jul 2014 JSE All Share Index up 37% in 13 months!
Despite crippling strikes, Zuma election victory and ratings downgrades, the JSE keeps on powering along at some pace. Since 24 June 2013 the JSE is up a whopping 37% excluding dividends which could add another 3%. In this time there were only 2 corrections of 5% or bigger, a 6.5% correction in November/December and a 5% correction in January. The last time the Stochastic indicator was low enough to give a proper buy signal was in March (you can learn more about technical analysis as well as fundamental share analysis if you register for free as an iView client onwww.sanlamitrade.co.za). The JSE is clearly expensive, trading at an 18 times historic P/E ratio. At least four factors support the stockmarket:
- No alternative investments. There are nothing that can really compete with the stockmarket currently. International Bonds are far from trading at normal yields as a rsult of QE. Property is still quite flat.
- Huge global liquidity seeking yield. US tapering is not the same as tightening, they are only pumping less money into the system.
- Foreign investment. With yields in the US and Europe so low emerging markets are still attracting foreign flows.
- Many of our biggest listed companies on the JSE earn most of their profits abroad.
At some stage the JSE will correct, but with so many investors waiting for just such an event, the correction is likely to be small. When? If I knew that I would not be working now would I?
– Gerhard Lampen
Head, Sanlam iTrade