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Oliver's Insights – Shares at new recovery highs

This note looks at the outlook for the share markets.

The key points are as follows:

- Share markets have broken out to new recovery limits. The Dow Jones index in the US is back over 11,000 points. Asian shares are rising above January recovery highs and the Australian share market has pushed through the psychological milestone of 5000 points. This has taken US and Australian shares back to around where they were when Lehman Brothers went bust.

- While a short-term pause or correction is a high risk, the cyclical recovery in shares still has much further to run. Global economic activity is continuing to recover, with the recovery looking increasingly self-sustaining. Earnings growth is likely to be strong over the year ahead, the liquidity backdrop for shares is still favourable and the recovery from March last year is still modest by the standards of past cyclical bull markets.

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