Investors fearful of market decline
Published 17-MAY-2019 14:42 P.M.
3 minute read
Hey! Looks like you have stumbled on the section of our website where we have archived articles from our old business model.
In 2019 the original founding team returned to run Next Investors, we changed our business model to only write about stocks we carefully research and are invested in for the long term.
The below articles were written under our previous business model. We have kept these articles online here for your reference.
Our new mission is to build a high performing ASX micro cap investment portfolio and share our research, analysis and investment strategy with our readers.
Click Here to View Latest Articles
Earlier in the week the Australian stock market fell heavily on news that the US trade war with China was once again heating up. Investors were already nervous given that many believe that a change in government on Saturday could see the Australian stock market fall away. So will the sun shine tomorrow or should we get ready for a storm?
I believe you can put away your umbrella, as both the US trade war with China and the Australian election are just distractions that can be largely ignored. Regardless of the result in the election, the Australian stock market is and will continue to be bullish. While the US and China are expelling enough hot air to float an army of balloons, both leaders want to be seen to be doing the right thing for their country. That said, this doesn’t diminish the fact that economically they both need each other.
After falling heavily early in the week, the Australian share market recovered mid-week on the back of the Materials and Energy sectors. By Thursday the market was trading higher for the week in a show of resilience, despite the Banks falling away once again.
The third quarter trading update for the Commonwealth Bank flagged an extra $714 million in additional customer remediation’s resulting in their shares falling heavily, and at one stage they were down over 4% on the previous week. NAB and Westpac both paid dividends this week and their share price fell away accordingly, although the fall was more than normally expected, indicating the banks are still weak. NAB is down over 4% and Westpac down around 6%.
Looking at the top stocks in the ASX 200, Fortescue shares jumped 11% after the board announced a fully franked dividend of $0.60 per share. Fortescue has been one of the top stocks in the market this year with strong iron ore prices being the main contributor to the company’s performance, alongside a strong balance sheet and plans for expansion.
Lend Lease rose 10.6% on whispers of a potential takeover by a major Japanese company, while the US China trade war escalation has seen Evolution Mining shares rise over 9% in the past week. The worst performers include Reliance Worldwide, which is down 21% after releasing an update with revised guidance and Mayne Pharma Group dropped 14% following a downgrade from a UBS analyst.
The sectors that performed well this week include Materials up 3%, and Energy and Telecommunication, which were both up over 2%. Financials was the worst performer down over 3%, followed by Utilities and Consumer Discretionary which were just in the red.
So what do we expect in the market?
As I have mentioned on a number of occasions, the Australian stock market is showing amazing resilience in the face of a lot of speculation and uncertainty. While I think it is possible the All Ordinaries Index can fall to between 6,100 and 6,200 points in the next four weeks, it appears as though it will more than likely rise.
While I am prepared for a possible short term volatile down move with the election result and possibly more trade war news from the US, I am certain it will be short term and that the Australian stock market will be bullish in to the second half of 2019.
My advice to investors is to stay calm and carry on.
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in book stores and online at www.wealthwithin.com.au
General Information Only
S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (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 and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.
Conflicts of Interest Notice
S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.
Publication Notice and Disclaimer
The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.
Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.
This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.