Tell me something I don't know

What's the motivation for people who read columns like this one? Of course the answer depends on who you are and what's important to you, but there's generally a common thread of interest. Which is a need to be told something you don't know!

Someone else's knowledge
You don't have to be a genius to work out that the range of Yahoo! readers varies substantially, but even the amateur investment 'expert' can miss vital developments and can take advantage of someone else's view on a critical development.

The Yanks have jobs
For instance, in case you missed it, the Yanks received a good jobs report late last week. In March, 180,000 new jobs were created. Wall Street analysts expected a 130,000 gain, so the higher figure was a welcome surprise.

To add to the good news, February's figures were upgraded from 97,000 to 113,000; and unemployment rates for March fell from 4.5% to 4.4%.

The US is on a win
This is a win, albeit a short-term win for the current central bank boss, Ben Bernanke, who thinks the US economy muddles through a downturn without a recession. This is in contrast to his predecessor, Alan Greenspan, who has warned of a possible recession by the year's end.

The Bernanke stance is good for the stock market in the US and ultimately worldwide, including Australia.

The Aussie effect
For anyone hoping on a hold to interest rate rises in Australia, a bad jobs number in the US and a greater prospect of a recession is more likely to protect you from higher mortgage repayments later this year. Our Reserve Bank would be reluctant to raise rates with the US economy nosediving.

Focus on inflation
The inflation figures released on 24 April is the next big focus for the Reserve Bank. If these are on the higher side of the 2-3% band the Big Bank looks at for inflation, then May could be a bad news month for those with mortgages.

Switzer's choice
If I had a choice, a stronger than expected US economy and no recession or significant economic slowdown here would be my preference. This could play havoc with jobs, customers' overall spending and profits. It would also hurt share prices, super funds returns and wealth generally.

Of course, the best result would be lower inflation levels and a stronger than expected US, meaning the slowdown there would be considered a soft landing. This would prevent any major impact to our economy, as it slows down some time after the US.

Follow the leader
Historically, we track the Yanks when it comes to economic growth, but with a lag of six-nine months. If all of this happens, interest rates could stay on hold.

At the moment a Bloomberg survey of more than 20 economists suggests that approximately 50% of economists think there'll be no interest rate rise this year. Many of them would be negative on America's economic growth prospects. However, nearly 100% of those surveyed thought we'd see an interest rate rise next year!

Give me a sign
So, the state of the US economy is very important in coming months and while the recent good jobs news could be an early warning that panic mightn't be necessary, it's only one good sign. Unemployment numbers are a lagging indicator and can be a reflection of better times say six months ago. Recent reports suggest many US sectors are feeling the pinch, particularly if they're related to the troubled housing industry.

It's all hip-pocket related
The hip-pocket reason for watching these big macroeconomic developments is the bearing these numbers can have on a critical number for local investors. The critical number and question is: how much does the overall stock market rise by this year?

An expert's view
Commonwealth Bank number cruncher Ron Bewley expects the S&P/ASX 200 Accumulation Index to rise by 13.2% this year. Last year he tipped close to 16%, but proved a tad conservative with the market going up a big 24.2% for the year to February 2007.

While 24% is better than 16%, most investors would be happy if Bewley's 13.2% forecast for this year comes home for him and the rest of us. If the Yanks avoid recession, this would contribute to a 13% and upwards rise in our stock market - and a win in the recession argument for Bernanke over Greenspan.

Tell me more
For those looking for some more things they don't know, let me reveal that objective surveys of active investment fund managers who buy and sell shares regularly against index funds - which simply rely on the index - generally conclude that active fund managers are over-rated.

Something to remember
Don't get me wrong, there are some stand-out fund managers, but not many who consistently bring in stellar results. This is worth remembering when you are looking for funds to invest in or if you're creating a portfolio of shares in your own super fund.

Click here to visit Peter Switzer's website