SHANE OLIVER: Stock Market Falls Just A 'Correction', Not A Bear Market

Still a Bull Photo: Getty/Denis Doyle (File)

Shane Oliver has a forecast of 5800 for ASX 200 by the end of 2014.

It’s a call he was sticking with when he appeared on Sky Business yesterday afternoon and it is a call he is sticking with in his latest Oliver’s Insights report.

Oliver says in his note that:

Global, and particularly Australian, shares have seen a bit of a pull back over the last month which could have further to go in the short term.

However, what we are seeing is likely a correction as opposed to a new bear market. From a fundamental point of view the cycle still looks okay with no sign of the overvaluation, overheating economic conditions, onerous monetary tightening or investor euphoria that normally precedes major bear markets.

He says that as we approach the end of QE this month that “nervousness is likely to intensify” which could drive US, and by extension Australian and other markets, lower by up to 10%.

But it’s not a bear market, Oliver says, because:

  • Valuations are not extreme;
  • The global economic cycle is a long way from posing a major threat to shares. The global economy is growing, but it’s uneven and sub-par. This is a blessing in disguise… as a result, global monetary policy is set to remain easy; and
  • We are still a long way from the sort of investor exuberance seen at major share market tops.
  • Which means that, as Oliver puts it, “absent a left field shock the most likely outcome is that, while shares could see more downside in the next month, this is likely to be limited with the bull market to continue”.

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