AMP Capital chief economist Shane Oliver said the recent rebound in shares, commodities and commodity currencies like the Australian dollar has been so fast it has taken them to a point where they have technically been overbought.
There was already been some pullback last week, he said, with the trigger provided by various Fed officials “expressing confidence in the US economy and the Fed’s desire to continue raising interest rates with its April meeting being ‘live'”.
“As a result the US dollar reversed a bit of its recent fall and most share markets, commodities including oil and the Australian dollar pulled back a bit,” said Mr Oliver.
This pullback, he said, may still have further to run but the broad trend of the share market is still upwards.
“Supportive of this are slightly better March business conditions readings globally, lessening concerns regarding China and confidence that the Fed is aware of global risks and doesn’t want to accentuate them by tightening too aggressively,” he said.
“Beyond the near-term uncertainties, we still see shares trending higher this year helped by a combination of relatively attractive valuations compared to bonds, further global monetary easing and continuing moderate global economic growth.”