The recent rise of the market has been on the back of strong earnings results from major companies such as Commonwealth Bank, Wesfarmers, CSL to name a few.

It’s good to see the market rewarding companies reporting solid results. Especially for the patient long term investors who held onto their quality blue chip companies throughout the Global Financial Crisis (GFC), when the market was pricing them at bargain basement prices.

Falling interest rates in Australia are also driving our market higher. Investors are on the hunt for income as interest rates continue falling, so more money is finding its way into high-yielding shares.     

Another influence on the rise in our market has been the strong performance of the US Dow Jones Industrial Average, which has recovered the majority of its losses and is trading a whisker away from the heights it reached in 2007.

Where to from here?

The Australian market is still trading around 25% below its all-time high reached in 2007. Over the past 5 years our market has priced in the worst, however as positive company results keep coming through, the market continues to recover value.

Global macro risks however don’t seem to go away and continue to be a threat to the market, including the slowing of the Chinese juggernaut, and low growth in the Euro Zone. However, to turn the negatives into positives, yes Chinese investment and the demand for our raw commodities has slowed; however the rise of the Chinese consumer and middle class is changing the landscape and many well-positioned global companies should benefit from this. The Euro Zone hasn’t broken up as initially feared and the ECB is managing the situation with many initiatives. Throw into the mix the continued recovery of the US housing market and the global situation isn’t looking anywhere near as bad as it was a couple of years ago.

Portfolio Management is Key

As always, disciplined portfolio management is as important as ever. A well balanced and diversified portfolio is important to manage risk. Regular portfolio rebalancing is paramount to re-weight your portfolio back to its required allocations. 

The Australian market has recovered around 60% of its value from its low point in 2009, therefore investors who continued investing throughout the GFC should have recovered a good portion of their losses by buying low, and making healthy gains on many of their individual stock positions. It’s still  as important as ever to be diligent, lock in profits and take some exposure off the table in positions that are excessive relative to the rest of your portfolio.