Market rally has softened economic downturn: Tagliaferro
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The market rally in Australia since March has softened the downturn in the economy by enabling debt-burdened companies to raise capital, according to Anton Tagliaferro, investment director of funds manager Investors Mutual.
Tagliaferro said he was pretty fearful in January and February at the way the market was falling and that there were so many companies with large debts.
“However, we’ve seen dozens of companies, such as Bluescope, OneSteel, Mirvac and GPT, raise a lot of money thanks to the recent spurt of market confidence.
“The economy would probably be a in a bit of trouble today had the market continued to fall and had these companies not been able to access the share market.
“The good news is the big financial risks from these firms have now been eliminated and now it’s a question of waiting for when the stock prices will perform.”
Speaking on Sky Business Channel, Tagliaferro believes it is still going to be a “tough grind to economic recovery and that the markets are going to go into a sideways trading market”.
“I can’t see stocks roaring away because I can’t see earnings growth coming back in a hurry and unless there is a strong earnings growth, PEs (price earnings ratios) are not going to expand.”
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