Bulls are back

The whole GFC thing was a just a bad dream, wasn’t it?

We’re just 18 months on from the collapse of Lehman Brothers, which was set to push the global financial system to the brink of Armageddon, but things seem to have bounced back very, very quickly.

Indeed, Australia’s two main wealth generators – the sharemarket and property – are off and running once again.

Everyone knows about the boom in housing market, but gaining less attention has been the fact that the sharemarket has quietly hit its highest point in 18 months, since September 2008.

Pundits are now wondering if the ASX 200 index could get back above 5,000 points this week – not bad considering we were down near the 3200-point mark back in late 2008.

So what’s driving this mini bull run? There are a few things:

• The new mining boom. Continued commodity demand from China and increasing demand from the rest of the world (thanks to the slowly recovering global economy) is great for our market, given it’s heavily skewed towards resources stocks.
• Takeover time. You’ve probably noticed the flurry of takeovers of late, particularly in the mining sector. Takeovers push up stock prices, which push up the entire market.
• The banks. Our banks are just profit generating machines, and their share prices keep rising. Again, another big portion of the total market.
• The economy. Australia’s economy is in recovery mode, which means company earnings should improve over the coming 12 to 24 months.

The question is, can this bull market last? There are certainly a few dark clouds out there in the global economy, including the potential for an overheating China, and underwhelming US recovery and debt problems in Europe, where Greece continues to look decidedly ugly.

We are still likely to be in for a bumpy ride over the rest of 2010.

But for SMEs and entrepreneurs, the sharemarket boost is good news. The market is now clearly more accepting of capital raisings, floats, mergers and acquisitions, which means another funding door has opened.