Friday, 28 September 2007

XAO posts biggest monthly gain in almost 6 years

Last month I speculated that the market would finish up in September and I wasn't disappointed. The All Ordinaries Index (XAO) posted it's biggest monthly gain in almost 6 years rising 5.3% from the August 31st close and set a new record high of 6580.9.

In October 2001 the XAO rose 6.6% and went on to rise a further 6.7% over November December and January. Then the XAO plunged 18.4% between January 31st 2002 and the end of February 2003.

So what will October 2007 bring? Will we see a rally into the new year on the coattails of the Bernanke put? The markets have definitely climbed the wall of worry in September shrugging off awful US housing data and a tight credit market environment.

There are signs of life in the LBO market with KKR putting away a chunk of debt for the First Data deal. The Commercial paper market disappearing act is slowing, LIBOR has come down and the yield curve has returned to it's normal shape.

Apart from Housing the Australian economy remains robust with corporate profits and investment ticking over nicely. Of most interest next week will be US employment numbers to see if August's figures were just a one off.

So what does all that mean? Who knows? I certainly don't but just for kicks I'm going to say that October will finish on the downside for equities as data out of the US on housing, employment and consumer spending will be mostly negative.