The share market has fallen by 30 points or 0.6% in the past month. This is quite disappointing as the remnants of the Resources Super Tax concerns should have washed out of the markets by now. The better than expected positions of most European banks should have stimulated our market more.

Many Business Surveys have been showing a growing level of confidence up to June. The results from the June surveys are pointing to poorer conditions and confidence and may result in a slow down in activity.

The somewhat weak policy statements and strategic direction of both major parties involved in the next Federal Election are certainly not giving the business sector much confidence.

ASX Sector Weightings

Consumer Discretionary XDJ
Reduce to underweight position. Reduction in consumer and business confidence and fears of inflation and interest rate increases are weighing on the sector. The strong Australian dollar will help sustain this sector until interest rates in the US and Europe start rising. The sector really needs another stimulus boost.

Consumer Staple - XSJ
Maintain market weighting. The sector has recovered slightly in the past month, in line with the overall market. Given the stable nature of the underlying businesses, the high quality of stocks within the sector and the ongoing challenges the global economy faces, some exposure is warranted as a defensive measure. The building fears of a potential global slowdown will see more funds flow into this sector.

Energy XEJ
Maintain overweight. Oil prices are hovering between US$70 - $80 a barrel. The Energy sector has underperformed this quarter with coal and gas outperforming oil. The sector is expected to be supported by the recovery in global economic conditions, causing energy demand to grow in coming years, with the IEA and OPEC recently upgrading their global oil demand forecasts for 2010 and 2011. A longer-term investment perspective is required for this sector, given significant LNG growth opportunities for many major participants with earnings expected to rise significantly over a five-year horizon.

Financials -XFJ
Hold at market weight position. As in past quarters, sector exposure continues to be recommended via the larger retail banks. The sector had performed very strongly until the March quarter, but has now taken a substantial fall. Some M&A activity has now appeared in the insurance sector and we can expect that to spill into the property sector as availability of credit increases with a stronger economy and a construction boom. A stronger focus on AREITS may be due.

Healthcare XHJ
Remain at overweight. The sector performance has been steady. Nevertheless, as a defensive exposure to provide portfolio stability, we believe the sector plays an important role in risk managed portfolio construction. We believe sound growth opportunities exist within the sector while maintaining an element of defensiveness to portfolio construction to manage periods of market volatility. World demographics and continuing Government support within some sub-sectors makes this a defensive sector in current times.

Industrials - XNJ
Maintain overweight overall. The sector has exhibited its highly cyclical nature. It was unable to continue its strong July and September quarters and traded sideways since October until it fell in line with the rest of the market in May. As a wide range of stocks is captured in this sector, selective and careful stock picking is essential with a medium-term view required. The Transport sub sector has good prospects with a great potential for upgrades from a low base. Growth of revenue from international sources has been disappointing, suggesting that economic growth in areas outside Asia may be delayed for longer than expected. Tax issues in Australia are also weighing on many engineering companies.

Information Technology XIJ
Maintain overweight position. The sector capitalization held up during difficult times, reflecting relatively immune earnings growth potential from the broader macro-economic challenges. Careful attention to the growth patterns of these companies will reap great rewards in time. This has been a solid sector for the first part of the year and it is expected that this will continue. Significant share price rises have been achieved in a very short space of time which could lead to a period of consolidation.

Materials - XMJ
Maintain overweight. The outlook for global economic conditions continues to improve, assisting the outlook for demand for raw materials. Commodity prices have taken a small fall in $US terms. With an upgraded outlook for global recovery in 2010 by the IMF, the outlook for this sector is good. The PE for the sector are not overly demanding, however demand drivers from the US and China need to continue to strengthen.

Telecommunication Services - XTJ
Maintain market weight. Some uncertainty has been removed with the agreement reached with Government and Telstra. It is not clear who the winner will be as Telstra has sold its annuity income, but has eliminated much of the risk associated with a legacy copper infrastructure. We expect the best opportunities will come from the smaller more nimble end of the market. Telstra will maintain its position as a strong income investment.

Utilities - XUJ
Maintain market weight. Because of the essential services that are provided the companies in this sector are generally well supported and provide consistent, if not spectacular returns. The way the sector is now structured; most balance sheets are heavily geared to take advantage of the cash flows available. Companies with low gearing and strong cash flows can be seen as takeover targets. Costs are rising while capacity is not growing. A good sector for income investors.