Is the JSE flying too high?

With the JSE currently trading at high levels, it is unusual to find someone who isn’t too concerned about it.
South African money
It’s almost become accepted wisdom that the market is overbought and that things are unlikely to be very rosy from here on in.
But Mike Brown, the managing director of etfSA, feels that those who see nothing but gloom in the sustained rally on the local market may be losing a bit of perspective.
It’s worth starting off by looking at the numbers:
Over the first six months of this year, the FTSE/JSE All Share Index was up 12.75%. For the 12 months ended June 30 2014, it had gained 35.35%.
Those are some terrific returns, and they go back further. For the five years to the end of June, the All Share Index had risen by 21.59% per annum, which is one of the best long term periods of growth it has enjoyed for some time.
noorspoort trail run
It is because this rise has been so steep and so prolonged that questions have inevitably been asked about how long it can continue.
But while Brown agrees that a market correction or a temporary down cycle have to be considered as possibilities, this rally is not necessarily a clear indication that the market has to fall.
“The worldwide financial market collapse of 2008 and 2009 was the most significant fall in nearly 90 years,” he states. “The recovery from this collapse has been sharp, but this has been from a low base.”
Read the full article at Moneyweb

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