Are Australia’s economy and subsequent exchange traded fund (ETF) experiencing a recovery? Or it may just be that things are finally cooling down and returning to normal.

In March, Australia’s markets showed a 7% gain, the largest monthly rise in 14 years, reports Sarah Rich for The Australian. A majority of investors think that the worst of the bear market has finally come to a close, but shares have continued to drop back to around the same previous levels.

Healthy economic figures along with new U.S. economic policies have lured investors back into the markets. Trading volumes are on the up, and brokers are pointing to this fact as a result of more institutional buying. Investors are starting to invest in riskier stocks including the financial sector, retailers and mining services.

But the influx of investing could just be because of “short covering,” or short sellers trying to take profits by covering their positions. Fund managers may also be “window dressing,” or including stocks to make their performance appear better.

The previous upsurge may just be one of many rallies to come. Substantial economic news on a local and global scale will be what really determines an actual recovery. But for now, it looks like the markets are returning to a level of normalcy that will eventually allow for growth. Have an entry and exit strategy if this is an area you’re considerign.

  • iShares MSCI Australia Index (EWA): up 2.9% year-to-date

ETF EWA performance

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.