The Private Practice eZine Autumn 2013 Page 20

theprivatepractice.com.au

Chris Caton is Chief
Economist of BT
Financial Group.

Risk & Recovery

The share market fell in March, for just the
second month since last June. The ASX200
declined by 2.7% but remains up 6.8% for
the year to date. Including dividends, share
investors are 8.1% ahead so far this year. It's
made a lot of difference what sector investors
have been in.

So far this year, consumer discretionary

stocks have risen by 16.4% and the banks
by 15.5%, while the resources sector has
declined by 7.5% and materials stocks by
9.3%. The US share market had a far better
month, with the S&P500 index rising by
3.6%, to be up by 10% so far this year.
Remarkably, the S&P rose in 11 of the 13
weeks of the March quarter. This index
finished the month at an all-time record high.

Once again, a European country was the

cause of the Australian market's blues. In

this case, for the first time ever, the market
was depressed by the tiny Mediterranean
island of Cyprus.

Cyprus is the third smallest nation in

the eurozone. Its banking system is in a
lot of trouble, in part because it has made
a lot of loans in Greece. It thus asked for
aid from the Troika (the European Central
bank, the International Monetary fund and
the European Commission) to bail out its
banking system. It thus followed Greece,
Ireland, Portugal and Spain, each of which
has previously been `bailed out'.

As a condition of supplying aid, the

Troika asked that the Cypriot banks make a
significant contribution themselves, and a
plan (plan A) was hatched to impose a tax on
all Cypriot bank deposits, including those of
less than 100,000 euros.

Chris Caton puts forth his perspective on the financially troubled island of
Cyprus, budget resolutions in the US and the caution being displayed by
Australian businesses.