Tom Scollon
Chief EditorHere in Australia, with our share market roaring along, it is easy to forget the DOW Jones which is, after all, the world’s leading share market indicator. Despite its narrow base – only 30 stocks – we are always mindful of what is happening in that bellwether USA index.
The DOW does not have a predominance of resource and energy stocks, as our local market does, and Industrial stocks are going to be a side play for some time whilst the mining boom continues. This makes our market relatively more attractive, but beware of a single focus.
The DOW broke through the 11,000 mark in February this year with little fanfare here in OZ. Its cautious creep past that level was not heralded all that much in the USA either. Perhaps it was because of some lingering scepticism, and even mistrust, that it could hold such levels.
That is not to say that that 11,000 level may not be tested in the future. In fact it could head below that level - such is the nature of the market. But we are unlikely to see major fallout. There is no crash looming.
But what if interest rates did climb further in the USA? What if oil does head higher? These are the types of factors that could well bring it below 11,000. But not for ever.
There is enough resilience in the USA economy to withstand such buffering and over the next 12-18 months I believe we will see the DOW head for 12,000 and beyond. It may be a long, slow march but the journey will be rewarding for those many patient USA investors. It will also give comfort to investors in share markets throughout the world.
Enjoy the ride
Tom Scollon
Chief Editor