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Investors in wait and see mode

09.58 AEDT, Tuesday 13 November 2012

Investors in wait and see mode

By Ric Spooner (Chief Market Analyst, CMC Markets)

The markets are in one of those ‘quiet before the potential storm’ modes that have become so familiar in recent years. A quiet day’s trading is likely with little news over night to impact investor opinions of current macro risks. Investors have by now taken action to position portfolios according to their assessment of the probability of US politicians failing on the fiscal cliff or a near term exit of Greece from the Euro. Market valuations are unlikely to change materially until there is further news on these events

Forward PE levels in the S&P/ASX 200 index are close to the average for the last four years since the GFC. This reflects a situation where investors are torn between the potential for solid economic growth and improving confidence in the event of a good outcome on the US fiscal situation but the possibility of a serious deterioration if politicians fail in this task.

Investor activity today is likely to be centred mainly on specific company news and on switching portfolios between industry sectors with the recent trend of support for bank stocks likely to continue.

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