More volatile trading tipped

THE BT Funds Management group have reviewed the year of 2000 and come to a view that it was a year of market contradictions.

As BT Funds Management sees it “there have been highs and lows, bulls and bears – in fact the only consistent theme has been volatility”.

The start of the year was promising, with many global sharemarkets propelled to new high levels.

The now accepted term “tech-wreck” soon put paid to that with the warnings of slower sales growth and questions being raised as to the cash flow position of a number of the dot.com companies.

The correction on world markets at that time saw a substantial write-off of values all around the world.

The burn rate of cash in a number of the companies was beginning to be raised as an issue of great import.

Some recovery did occur as some investors saw the opportunities created by the fallout as attractive buying.

There was, however, a shift in sentiment as investors now started to focus on the fundamental certainty of the earnings flows.

As BT Funds Management saw it: “global sharemarkets were being driven higher by defensive or safe haven sectors”.

Oil prices surged to a 10-year high. This had its own impact on earning’s forecasts.

At the same time concerns were raised as to the possibility of a slow down in the rate of growth in the US.

The decline of the Euro against the US Dollar also caused some concerns to be aired as to the prospects in that region.

The second half of the year was no better for the technology stocks.

The NASDAQ continued to be hit hard with concerns being expressed about slowing global growth and future investment in information technology.

The bigger players such as Dell, Microsoft, IBM and Lucent were driven to revise their profit estimates downwards.

Even the now traditional quiet period in December did not turn out that way.

Volatility was evident right through to the last trading day before Christmas.

Here in Australia there was a substantial dip in the market just at the time of the break.

The question on everyone’s lips will be “Are we going to see more of the same in 2001?”

BT Funds Management’s view is that: “there is no escaping the fact that short-term trading conditions are expected to remain volatile.

“However, we expect the medium-term outlook for sharemarkets to be positive.

“This is because we believe that the US economy will not slow to a level that significantly threatens corporate earnings growth.

“Rather, we believe that US official interest rates will be lowered over the first half of 2001, effectively reducing economic uncertainty.

“Such an outcome would also provide a positive backdrop for sharemarket performance in other regions, most notably Europe and Japan”.

In passing, the boffins at BT Funds Management also make the following recommendations in so far as investing in these difficult times are concerned.

The three main tips that they specify are:

* Don’t abandon your goals.

* Be disciplined in your investment approach.

* Take a long-term approach to investing.

In these terms of uncertainty it is important that we remember these rules.

Our approach to any investing needs to be long term and reasoned.

The discipline that we should display must lead us to make informed decisions and not ones that react to shorter-term conditions in the market.