Funds manager Perpetual expects the local share market to trend sideways for some time, and remains cautious after the surge in prices since March.
The share market's 25 per cent jump in three months from its 5 1/2-year low on March 6 to June 18 was higher than the average 12-month recovery after previous share market slumps, Perpetual's head of Australian equities John Sevior said in a presentation on today.
On Tuesday, the All Ordinaries index has fallen a bit further to be at 3805.6 as of 9.30am.
It closed at 3111.7 on March 6, the lowest since July 31, 2003, having fallen 55 per cent from the record close of 6853.6 on November 1, 2007.
The stronger than normal recovery was a reason to be cautious, according to slides that Mr Sevior used in his presentation.
Other reasons for caution included the likely slower-than-average growth in Australia and the global economy, the several years it would take people to reduce debt, and that the estimates for 2009/10 earnings still seemed optimistic.
But there also were reasons to be optimistic, Mr Sevior said.
The point of maximum risk appeared to have passed, with bank capital ratios rising across the world.
The share market valuation, or price to earnings ratio, still was below the historic average, suggesting they offered value for money.
Shares also yielded much more than cash, and dividends would have to fall a further 60 per cent for share yields to get to the same level as the current yield on cash of about four per cent.
AAP
