THE US Federal Reserve bank's decision to taper down economic stimulus has been the major driver and reviver of financial markets in the past week.
Subscribe now for unlimited access to all our agricultural news
across the nation
or signup to continue reading
The US economy keeps getting better and better.
Data released a week ago showed the US economy was growing at 3.2 per cent (on an annual trend) in the fourth quarter of 2013, led by the highest level of consumer spending and business investment in three years.
Thankfully this news helped stabilise markets rattled in recent days by turmoil in developing economies.
Global confidence copped a knock with more evidence manufacturing in China was slowing.
Market turmoil returned to other parts of Asia as well, with Japanese stocks at one point slumping more than 3pc when the US Federal Reserve said it would scale back further on its stimulus measures.
Although a reduction in its monthly buying program was widely expected, it has been a blow for investors already dealing with a global sell off.
Recent attempts by central banks in Turkey and South Africa to stop the slides in their currencies have failed to have a significant impact, heightening jitters for money managers.
The Australian equities market has not been immune to any of this and I would suspect foreign investors will shy away from investing in our market if they are concerned our dollar will continue to fall with other merging market currencies.
Last week we also saw another disappointing sales update from speciality retailer The Reject Shop.
It reported sales growth up 18pc, but it was largely driven by a recent store rollout.
Revenue was $385 million for the first half, which was pretty much in line with expectations.
Store rollout is heading for a record 45 store openings in fiscal 2014.
On the surface this appears to be pretty good, but, like for like, sales for the first half of 2013-14 were flat which was worse than expected.
Lower foot traffic in shopping centre sites was the cause and first half and full year profit will be much lower than consensus expectations by as much as 30pc.
In addition to this, the gross margin fell slightly but it was enough to put a decent dent in gross profit.
Discounting and product mix issues were blamed.
Currency was also a factor, with the dollar falling 4pc in November and 2pc in December.
Competition also appears to be rising as players like Kmart discount their products to achieve higher volumes.
The Reject Shop business model and store rollout profile have been good, hence I would wait to determine if these negative trends continue and then review upcoming profit results to determine the suitability of the stock in a portfolio.
This article does not take into account the investment objectives, financial situation or needs of any particular person. Accordingly, before acting on any advice contained in this article, you should assess whether it is appropriate in light of your own financial circumstances or contact your financial adviser.
Christopher Hindmarsh is an adviser at JBWere. JBWere is 80.1 per cent owned by NAB and 19.9pc by Goldman Sachs.