Wall Street rules

This week's share market action suggests US interest rates may not rise as fast as many predict but the US dollar will certainly rise and this will affect our share market.

Summary: It is time for the US to start increasing interest rates and I think rate rises will be modest. Any sharp rate rises would cause a fall in bond prices and boost the US dollar, which could snuff out the US recovery. Meanwhile, China is trying to curb steel manufacturing, but I think the curbs will be less than many expect which will help our commodity prices. In Australia, we are almost certainly going to see a further decline in interest rates, and bank depositors are turning to the share market for income.

Key take-out: Certainly there is downside risk in our share market but that doesn’t mean that you have to bail out of everything.

Key beneficiaries: General investors. Category: Shares.

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