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Downside Still In Play For A-REITs

Technicals | Nov 15 2016

By Michael Gable 

It was a week to remember and we have to think back to the GFC to see such a wild ride in markets. Our downside target for the S&P/ASX 200 Index was reached, but blink and you would have missed it. Until Trump gave his speech, it looked like we would have a few days down in the market, giving us plenty of time to close off the defensive stance and buy the dip.

The consensus view was that an unlikely Trump victory would see the market sold off and gold rally, but it only lasted a few hours and now the market is doing the opposite of what was expected. It can be put down initially to a sheer sense of relief that the election is over and we can feel more comfortable putting money back into the market. Then the other ramifications start to become obvious. Trump will have control of both the Senate and Congress which means he can push through his policies that will ultimately give GDP a boost. Bonds have accelerated their sell-off and rates will have to rise at a quicker rate to contain Trump's inflation-boosting policies.

Infrastructure stocks will look good, along with cyclicals, banks, and quality resources (although the big names are too hot in the short term and have seen massive shorts build up on the register). Gold has taken a hit recently but investors still remain wary of a few issues and we should see it recover somewhat from here, but we've had to scale back our upside view. Property trusts and proxy-bonds will be the losers over the next year.

With the last six months being tough for investors and fund managers with Brexit and the US election to worry about, we see the market feeling a bit more relieved and looking to plough idle cash back into the markets. This means that the following six months, with the above roadmap of what sectors to look for, could present some great opportunities to make money in the share market.

One sector particularly hard hit of late has been Australian real estate investment trusts (A-REIT), as measured by the XPJ index.

The rise in yields is having a very obvious effect on the listed property sector. The uptrend broke a few weeks ago and price action remains very weak, with the XPJ failing to rally last week like most other sectors. We can see obvious support levels near 1165, which is a 38.2% retracement of the 2009-2016 rally. If that cannot hold, then the 50% level comes into play down near 1050.

Content included in this article is not by association the view of FNArena (see our disclaimer).
Michael Gable is managing Director of  Fairmont Equities (

Michael assists investors to achieve their goals by providing advice ranging from short term trading to longer term portfolio management, deals in all ASX listed securities and specialises in covered call writing to help long term investors protect their share portfolios and generate additional income.

Michael is RG146 Accredited and holds the following formal qualifications:

• Bachelor of Engineering, Hons. (University of Sydney) 
• Bachelor of Commerce (University of Sydney) 
• Diploma of Mortgage Lending (Finsia) 
• Diploma of Financial Services [Financial Planning] (Finsia) 
• Completion of ASX Accredited Derivatives Adviser Levels 1 & 2


Michael Gable is an Authorised Representative (No. 376892) and Fairmont Equities Pty Ltd is a Corporate Authorised Representative (No. 444397) of Novus Capital Limited (AFS Licence No. 238168). The information contained in this report is general information only and is copy write to Fairmont Equities. Fairmont Equities reserves all intellectual property rights. This report should not be interpreted as one that provides personal financial or investment advice. Any examples presented are for illustration purposes only. Past performance is not a reliable indicator of future performance. No person, persons or organisation should invest monies or take action on the reliance of the material contained in this report, but instead should satisfy themselves independently (whether by expert advice or others) of the appropriateness of any such action. Fairmont Equities, it directors and/or officers accept no responsibility for the accuracy, completeness or timeliness of the information contained in the report.

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