After the market fall: what’s the deal with banks?
Known as one of the most volatile months in the stock market calendar, many investors think of October with trepidation. Certainly, ‘Terrible October’ has lived up to its reputation. Around 6.6 per cent was wiped from the Australian exchange this month when it traded to 5,909.7 points last Monday.
Most of the fall occurred in one week, wiping out the euphoric rise that was recorded during reporting season on US and Australian stock markets in the second half of 2018.
The sell-off in Australian banks helped to push the market lower, with falls of 7 to 9 per cent. The Interim Report of the Royal Commission appears to indicate that the worst has past, although, the impact on the banks bottom line continues to be felt.
Banks remain vulnerable to short-term downside risk, therefore I encourage buyers to use a trend line to determine when they should be investing.
Investors have lost confidence in banks, as buying and holding these stocks for dividends has actually cost investors a sizeable portion of their capital and has placed a big drag on portfolio returns this year.
For new buyers, bank yields are between 6.4 and 7.7 per cent.
Other sectors that were sold off heavily to a low last Monday include Consumer staples (XSJ), down 5.6 per cent; Health Care (XHJ) dropped 8 per cent; Utilities (XUJ) was 5 per cent lower and Industrials (XNJ) lost 10 per cent.
The sector that fell the least was Materials (XMJ), down 4.2 per cent.
Wesfarmers dropped around 6 per cent in the carnage. The pending shareholding vote for the demerger of Coles didn’t support the share price. Other big losers were Bellamy’s Australia Ltd (BAL, down 25.5 per cent, Blackmores Ltd (BKL) and Costa Group Holdings Ltd (CGC) were down around 12 per cent.
So what do we expect in the market?
The Australian share market bounced off October’s low of 5,909.7 points on Monday to achieve a high of 6,048.8 points.
Following a strong session on the US market on Monday night, the All Ordinaries Index (XAO) managed to record the best trading day since 15 June.
It’s been an interesting few months for the Australian market, with a fall of 8.8 per cent from the high of 6,481.3 points to the low on Monday of 5,909.7 points.
Dale Gillham, Chief Analyst at Wealth Within and author of Accelerate Your Wealth
S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.
Conflict of Interest Notice
S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.
The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.