Where the Aussie Stock Market Could be in 2018

The market never rises or falls in a straight line.

The first seven weeks of this year have shown that.

From the start of the year until today the S&P/ASX 200 is up 1.6%. The supposedly terrible resource sector, as measured by the S&P/ASX 300 Metals & Mining index, is up 5%.

In fact, since 6 February, both indices are up 7.3% and 10.8% respectively.

That makes a mockery of those who say it’s impossible to make money in this market. That’s rubbish.

Proof of that is the 33% price rise over the past two weeks of a stock most of the mainstream had given up for dead. And yet the Australian Small-Cap Investigator readers who followed our advice 15 months ago should now be sitting on 109% gains…

Over the past eight months we’ve made a lot of noise about our view that the Aussie market is heading higher.

You may remember that last July we put our neck on the line to say the Aussie market could reach 7,000 points by the end of 2013.

It was a big call. It was also the wrong call. The main Aussie index didn’t hit 7,000 points by the end of the year. In fact, it got nowhere near it. The S&P/ASX 200 finished the year at 5,352. That’s almost a whopping 1,700 points short of our target.

And yet in a way, missing the target by such a wide margin didn’t matter. What was more important was that we got the direction right, and for the most part we got the investments right.

But as we’ve explained before, investing is all about looking ahead. The past means nothing. Now, everything we see in the market tells us to forget about the idea of the market hitting 7,000 points.

There’s a much bigger target to aim for…

When a Bearish Investor Bought Stocks
 

Our favourite example of making a big call, getting the timing wrong, but still making a bucket load of cash for his clients is Paul Tudor Jones.

You may not have heard of him. He was a big figure on Wall Street in the 1980s.

In 1985 he made a big call saying that the stock market would hit a top and then crash…in 1988. He was sure it would happen. But Paul Tudor Jones wasn’t like most bearish analysts who planned to wait for the crash and then buy stocks cheap.

Because he was so confident about his analysis, he played the expected crash a different way. Instead of sitting on the sidelines in cash, he also believed that the market would keep climbing from 1985 until 1988. So, what do you think he did?

That’s right, he took huge positions in the market, betting that until the crash happened he could clean up as the market continued to rise.

And that’s exactly what happened.

Of course, the market didn’t crash in 1988. The market crashed in 1987. But by then Paul Tudor Jones had reassessed his outlook along the way. So that by the time ‘Black Monday’ hit in October 1987, Jones had set his funds to benefit as the market took one heck of a beating.

Can you afford NOT to be in Stocks?
 

Now, don’t get us wrong. Your humble newsletter writer and stock market analyst isn’t about to claim we deserve to rub shoulders with the likes of Paul Tudor Jones, George Soros or Jim Rogers.

But what we are saying is that we take the same view of today’s market that Jones took of the market in 1985.

We get it that there’s a whole bunch of trouble brewing. We get it that the actions taken after the 2008 market crash have simply sowed the seeds of the next crash.

We get that. You probably get that too.

The thing is, do you want to just keep all your money in cash waiting for a crash that may not happen for another two years? What if it takes even longer for a crash to happen? What if it doesn’t happen for five, 10 or 15 years?

Can you afford to be out of the market for that long?

If we’re right about where the market is heading over the next four or five years then the answer will be a resounding ‘No’.

Because based on the scenario we believe will play out, the Aussie stock market is heading in a direction that could see it hit 15,000 points by 2018.

‘Dead’ Stock More Than Doubles
 

Of course, you could rightly wonder why you should believe us. After all, we’ve just told you that our 2013 year-end target for the Aussie market fell woefully short – nearly 1,700 points short to be precise.

But that’s actually our point. In a way the target number is arbitrary. But it’s symbolic of where the market could go if the global economy heads where we expect.

That means a continuation of outstanding growth in China’s economy, at least the appearance of a recovery in the US and Europe, an Australian economy that recovers after perhaps going into a recession for the first time in 22 years, and ongoing demand for Australia’s natural resources.

Remember what we said to you just three weeks ago:

When we read everywhere about the death of resource stocks, it tells us one thing – you better get ready for one heck of a resource stock rally…

Since then the resource stock index has climbed 10.8%. And that could be just the beginning. Not just for the resource sector, but for the entire Aussie market. An ‘old media’ stock we tipped in November 2012, when most other investors had given it up for dead, is now up 121.7%. 33% of that gain has come in the past month.

If this all plays out as we expect there are big rewards ahead, especially for the type of stock that tends to perform best when stock markets rally.

Bottom line: whatever your circumstance, no investor can afford to miss out on this rally.

Cheers,
Kris+

PS: You can quiz me on my bullish stock market views in person at the upcoming World War D conference in Melbourne at the end of next month. I’ll be on the stage with global finance gurus Dr Marc Faber, Jim Rickards, and Satyajit Das. You can find out more here about what I consider to be the best money and finance conference in Australia this year. Click here for the revealing trailer…

Special Report: Retirement Security Ladder


Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read. Money Morning Australia is published by Port Phillip Publishing, an independent financial publisher based in Melbourne, Australia. As an Australian financial services license holder we are subject to the regulations and laws of Corporations Act and Financial Services Act.


Leave a Reply

Your email address will not be published. Required fields are marked *

Money Morning Australia