Looking into the crystal ball for 2000

The year 2000 has got off to a nervous start in the market place with investors taking last years profits and fear of another interest rate rise in the US, soon to be followed locally.

The result of this nervousness was a drop in global sharemarkets the size of which has not been seen since October 1997. Commentary from analysts has been mixed with some saying the correction will only be minor and is driven more by profit taking rather than any underlying fundamental economic problems, i.e inflation fears. Others are saying the market is grossly overvalued, especially in the US and a correction of up to 20% is not beyond the realms of possibilities. In fact such a correction would take the pressure off the Fed and the RBA to lift interest rates any higher.

A more likely scenario is probably somewhere in between. We believe interest rates will continue to rise over the next 12 months, probably in the order of between 0.75% and 1.00%. The sharemarket will probably come off a little more then consolidate over the second half of the year. The economy will continue to grow locally on the back of tax cuts, the Olympics and increased global demand. Overall, steady growth, small rise in rates and reasonable business and consumer confidence.

Anyway, that's our crystal ball look into what's in store for the next 12 months. Hopefully we're not too far off the mark.