A continued upward trajectory in share markets has been called into question by Wealth Within investment analyst and fund manager Dale Gillham.
Gillham believes share markets will not sustain recent gains, predicting that by early to mid 2011, markets will have fallen back to March 2003 levels.
“I don’t think next year’s looking great — it won’t be as bullish as this year,” Gillham told Money Management.
Gillham, a technical analyst who runs individually-managed accounts, said a number of factors would hamper the performance of the Australian share market in coming years.
While Australia and many world economies have shown signs of improvement in recent months, Gillham believes performance is being propped up by stimulus.
Further, with moves to shorter working weeks, the level of underemployment is not being reported.
Tourism and discretionary spending are down, interest rates have moved upwards, and while housing prices may still be strong, Gillham believes the removal of the First Home Owners Grant may affect that.
“We’ve overshot the mark a little bit,” Gillham said.
“When you look at company valuations and fundamentals, most companies are down 25-30 per cent on their revenues. They can’t catch up that fast, and the prices are now overshot again.”
Gillham believes banking and financial stocks are overheated, while the healthcare and energy sectors may provide opportunities going forward.
“I think we’re in a period similar to the early 1970s, where the market came down 32 per cent in 1971-72 then rose up about half of what it fell, and then fell another 62 per cent into 1974,” Gillham said.
“That’s what I think we’re doing. Right now we’re doing the leg up, and we haven’t even risen half of what we’ve fallen from November 2007.”
As a result, Gillham is focusing on short to medium-term acquisitions, and is “ready to get out and go fully back into cash again if I need to”.
