John Abernethy speaks to David Walker, Senior Analyst at StocksInValue.
The ASX has fallen back to 5,100 – 5,200 after an ordinary AGM season and decisions by asset consultants to deweight Australian equities. Bond yields are more likely to rise than fall, implying earnings multiple compression unless earnings growth in the equity market accelerates. This is why the ASX is stuck and mainly a yield-driven market. It could dip below 5,000 given market pessimism about commodity prices.
In this difficult investing environment patience is valuable. Investors should retain cash to buy dips then sell to lock in trading profits. The right approach to global investing is also important: move cash into US dollars on Australian dollar strength, then wait to buy undervalued global equities.