That was the week that was…. Your weekly market wrap (03-07 September)
It has been an interesting few months for the Australian market, with many stocks rising strongly on announcements, however, there were a number of companies that missed earnings expectations or downgraded their forecast and are now ‘worse for wear’. Some companies are likely to have been oversold. Good stocks will continue to rise.
The major theme for the corporate reporting season is that it proved to be a positive influence on the Australian market.
Interestingly, if you compare the performance of the market this year to the prior year, it has performed significantly better in 2018, post reporting season. Last year, the All Ordinaries Index (XAO) fell by around 3 per cent in August and continued to fall into November. This year, over the same period, the market has risen by around 1 per cent.
As with every reporting season there are winners and losers.
The Winners this reporting season include; Credit Corp Group (CCP), JB Hi-Fi Limited (JBH), Telstra Corporation Ltd (TLS), TPG Telecom Ltd (TPM), Afterpay Touch Group Ltd (APT) and Webjet Limited (WEB).
Those who were not so lucky included; Rio Tinto Limited (RIO), Iluka Resources Limited (ILU), Origin Energy Ltd (ORG), Ansell Limited (ANN), Flight Centre Travel Group Ltd (FLT) and Fortescue Metals Group (FMG).
Looking at the reporting season summary, around 50 per cent of companies beat analyst expectations, while only 20 per cent were below expectations. Looking back at the same period in 2017, approximately 40 per cent were ahead, while around 30 per cent missed the mark. Given this, our market has had a good reporting season.
So what do we expect in the market?
The All Ordinaries Index (XAO) traded down this week by around 3 per cent. The market opened at 6,428 points on Monday before trading down towards approximately 6,216 points during trade on Friday. This pullback is to be expected. The market has risen for 21 weeks to the recent high of 6,481 points. When the market is bullish, it will typically rise between 15 and 22 weeks before it pulls back for a number of weeks.
Overall, I believe that the outlook for the Australian market is likely to remain largely positive in the medium-term. It is probable for the XAO to achieve a new all-time high in the first half of 2019.
Good luck and good trading!
Dale Gillham, Chief Analyst at Wealth Within and Author of Accelerate Your Wealth.
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