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Which direction will the stock market go in 2020?
6 analysts share their stock market predictions for the next 12 months.
Australia’s economy is passing through a very unusual time. Interest rates are at historic lows, the stock market is hitting record highs, yet wage growth remains flat and consumer spending is going in the wrong direction.
That combined with changing global trade dynamics makes for an interesting year when it comes to investing. I asked 6 market analysts about their predictions for the next 12 months and the big themes they thought would impact your investments, here’s what they had to say.
Remember: No one can truly predict what the stock market will do, these are speculations based on past events and future projections.
Stock market to slow down
Last year was a smashing one for stocks – Australia’s benchmark ASX200-index returned 23% on average – but the broad consensus is that stocks will not be as strong in 2020.
This is because future economic improvements on the back of low interest rates have already been priced in, according to Pepperstone’s head of research Chris Weston.
“The market has taken the [economic] performance of 2020/21 and they’ve put it into 2020,” Weston told Finder. “Therefore, when you look at expected returns, it’s very difficult to believe we’re going to see anything like what we did in 2020.”
S&P ASX-200 index in 2020
Bell Direct’s market analyst Jessica Amir agrees that we’re unlikely to see double digit returns for a second year in a row.
“The broad market is only expected to deliver a return of 8% (excluding dividends),” Amir told Finder. “If you’re seeking stronger returns than the Aussie share market’s benchmark, you will need to work for them.”
That means investing in an index fund (a fund that passively tracks the performance of the stock market) won’t cut it for high-growth over the next 12 months as it did in 2020.
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. But not a bear market
One of the biggest questions for investors is whether the stock market will crash after such a big run up.
In fact, there’s little evidence that stock markets normally go backwards after a strong year, according to Burman Invest’s chief investment officer Julia Lee. She predicts the stock market will continue to be a good investment in 2020.
“When asset prices go up strongly, investors tend to get wary. They get scared that what goes up must come down. The numbers tell a different story – Lee
Of the 26 other instances in history where the global share market (MSCI index) has delivered double digit growth since 1970, on 19 occasions it was followed by another positive growth year, Lee told Finder.
Interest rate cuts
In any case, with interest rates predicted to drop twice more this year, Lee says there are few alternatives other than stocks or property for investors seeking high returns.
Weston agrees that despite a slow down, stocks will continue to be one of the best investments for your money this year. “What’s worked in 2020 will continue to work in 2020 – we’re just not expecting to see the same returns,” he says.
When it comes to stock selection, Amir suggests investing sectors that are backed by physical assets such as property or infrastructure stocks.
“When interest rates drop, serviceability on loans increases and pushes property valuations up. You could look at high quality property investment companies, listed Real Estate Investment Trusts (REITs), as well as the property index itself (ASX200 A-REIT).”
Read our guide on how to invest when interest rates are low for more money ideas in the year ahead.
Weak AUD + USD
Low interest rates usually lead to a lower local currency. All things equal, if rates remain low in 2020 as predicted, we can expect the AUD and USD to remain weak.
This should support Australia’s export sectors such as energy, mining and tourism, and also have a positive impact on commodities markets, according to editor of FN Arena, Rudi Filapek-Vandyck.
“It automatically opens the door to rallies for base metals, gold, emerging markets and fringe currencies,” as he explained in a recent Finder X article.
“It would also translate into an exogenous headwind for many of the better performers in the local share market, including healthcare and technology stocks,” says Filapek-Vandyck.
With Australia literally ablaze, there has been a marked shift in consensus towards climate change both here and overseas. Many analysts expect this to have a notable impact on stock performance this year.
In fact, head of equity strategy at Saxo Bank Group, Peter Garnry, believes “green stocks” will be the next mega trend in equities, thanks to government and investor support.
“Investors should tilt portfolios towards these new green industries,” Garny advised in a recent note to clients. He suggested looking to stocks with exposure to sectors such as renewable energy, bioplastics, electric vehicles and plant-based foods.
If you’re interested in green investing, take a look at our guides on renewable energy stocks, ethical super funds and sustainable ETFs.
Few events on the calendar have the potential to be as disruptive to stocks as the upcoming US election in November.
While the first half of 2020 is predicted to remain fairly positive for stocks, the US election and changes to Brexit bring a number of risks in the second half, warns IG Group’s market analyst Kyle Rodda.
“It’s probably going to be a pretty rough and tumble election that could really throw up some divergent views in terms of economic management.
Donald Trump, for all his short-comings, has been a boon for the stock market thanks to his pro-business tax legislation. If he’s not elected for a second term, Rodda told Finder we might see a stock market reversal.
“It depends on who is elected. If you get someone like Elizabeth Warren, who is considered a very market unfriendly candidate. that would probably be the least desirable action for the stock market.”
Housing credit boom
If Australia’s economy takes a turn for the worse, the RBA may be forced to step in and intervene with quantitative easing (QE) measures.
QE is where central banks pump cash into the economy by buying up bonds and securities from banks and other major institutions. In the case of Australia, this could be the RBA buying up mortgage-backed securities from the banks, according to Weston. This would have a flow-on effect on the housing market.
“If inflation starts to drop along with wages growth and higher levels of unemployment, the market will get pretty excited about the idea that the central bank in Australia is going to do residential mortgage backed security purchases,” he says.
“In that situation, we would see the bank’s borrowing costs significantly reduced and that will have a flow on effect into housing,” says Weston.
In other words, if the banks get cheap funding from the RBA, we could end up with a credit boom in the housing market and even lower mortgage rates.
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, options or any specific provider, service or offering. It should not be relied upon as advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.
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Australian Stock Market
Oil Search – There is a potential reversed price pattern in the weekly chart. Important price points to watch in the one hour chart: major support – 2.50 support – 2.10 major resistance – 3.50 resistance – 3.10
A video analysis for YQG123 i run through some more examples of the 89% fibonacci level being an important buy zone off of a big sell off. We are awaiting volume to start picking up but this asset seems to have great potential to the upside after it broke out of a major downtrend line. good luck and happy trading rigo
THIS ANALYSIS IS FOR EDUCATIONAL PURPOSES ONLY. BEARISH TARGET AS SHOWN ON THE CHART AFTER THE COMPLETED TOP.
Looking for CBA $59 to enter and hold for long term
Massive bullish volume, creating demand. Could gap up on Monday. Really cool trade to take. Probable upside from here.
Likely close below the 200MA on the weekly chart will lead to further downsides as the alligator indicator opens up bearishly. Also currently sitting under the ichimoku cloud, providing a resistance. We could be on the brink (early stages) of a recession.
Double click the price column to see the chart. Here’s my trade setup for today, $QAN : ASX long off bullish momentum and.382-.618 fib zone. This has been profitable of late with some nice s/r swings and stock holding up well during the recent downturn. Not financial advice. As always, trades can go against us no matter how good a chart looks, risk management is king.
Half position short on at 18.47 Overall market (XJO, DJI and SPX is now closing daily candles red) We also have global bad news catalyst of covid19 out break in the US I see next weeks trading session as a short, as confidence in this overall market rally should weaken. APT hit a daily exhaustion after a solid rally, I am now playing this as a “dead cat.
Given the recent market movements my primary count for APT has changed considerably. I will become far more bullish if we get a solid pivot at one of the areas mentioned below. The first entry to the last stop is
25% drawdown so size positions carefully. A position of 5% of total account would be
1.25% loss. Long Entry: 1st Entry for Wave 3 of Wave 3: $24 .
Look at this monthly wick it’s dying to bounce up 1st of April is the new wick all the stimulus etc,etc, #ASX200 #BTC buckle up this market has a bounce incoming Manipulated global panic cause the largest and most devastating destruction around the world and this market gonna go boom somehow I’m somewhat dissapointed and a little saddened by the fact.
We are in a much worse situation than the GFC. I think we have a way to go yet and will see this thing playing out for months to come as businesses default, housing crashes etc. The Bottom is way off. Just ride the way and play the ups and downs.
Death Cross 200 MA & 50 MA looming for CBA. Let’s hope we get a bounce. If not see next support levels below
hey traders, look for a break of the TL and trend continuation to the upside. pullback likely to be complete. upside inbound regards, TM
westpac bank has been completely gutted buy the covid19 mania. literally feels like 2002 out here . gonna catch a long on this soon but no indication of reversal yet
Afterpay aka APT bounced back from the last 3 days free fall. Is it a dead cat bounce? Is it gonna be a V-shape recovery ? Will it keep going up? Whatever it was today was heinous with a 40% rise for those who bought the dip. I will monitor what happens and when the volatility drops I will buy for now I have it on my radars based on the different S/R levels on the chart.
If gap over resistance and Bearish 10:30 Short
Can we without any doubt attribute CBA to the RSI bullish divergence? Is it too early to say that the bounce is for sure? In any case we dont rub a crystal ball here to know what the future holds. However, one indicator showed an early sign of the recent bounce. That indicator is none else the RSI dvergence. Of course 57, recent bounce level, is in the historic.
Looking at WHC on a weekly chart Price has come down into our buy zone Price coming down into value low on VPVR and also sitting on the 786 fib Internal indicators looking pretty good All im waiting for is structure to come in on price Potential 100% profit trade
The Australian stock market consists of the Australian Securities Exchange (ASX), the Sydney Stock Exchange (SSX) and the National Stock Exchange (NSX). The largest Australian stock exchange by far is the ASX, with 2,200 listings and a market capitalization of around 1.6 AUD trillion. Among these listings are well-known and actively traded companies such as the Commonwealth Bank, Woolworths, Qantas Airways, the Westpac Banking Corporation, Rio Tinto and the Westfield Corporation.
The main stock index for Australian stocks is the S&P/ASX 200, which covers approximately 80% of Australian equity market capitalization. It is managed by S&P Dow Jones Indices and widely recognized as the institutional investable benchmark in Australia. There are several related indices such as the S&P/ASX 100 and the S&P/ASX 50, tracking the performance of the 100 and 50 most liquid stocks respectively. TradingView has tools like a stock screener and quotes dashboard to find the best stocks to trade.
$1.4 Trillion Apple Is About To Dwarf The Entire Australian Stock Market
Apple is so valuable that it’s close to eclipsing the entire market cap of the Australian stock market (ASX).
Apple is so freakishly huge that it’s almost on par with the stock market of one of the world’s wealthiest countries. | Image: REUTERS / David Gray / File Photo
- Apple is nearly worth more than the entire stock market of one of the world’s wealthiest countries, Australia.
- AAPL’s incredible run puts it’s valuation on the brink of $1.4 trillion which is where the Aussie ASX currently sits at record highs.
- Despite U.S. economic dominance it’s hard not to be a little unnerved by Apple’s bubbly valuation.
In an extraordinary example of the staggering performance of the U.S. tech sector, Apple (NASDAQ:AAPL) is now worth almost $1.4 trillion. To put this extraordinarily large figure in context, this puts the iPhone maker on track to be worth more than the entire market cap of the Australian stock market (ASX) very soon.
Apple Is Nearly Worth As Much As Australia’s Entire Stock Market
When trying to grasp just how exorbitant Apple’s $1.39 trillion valuation is, it’s vital to bear in mind just how wealthy Australia is. Currently ranked no.14 in the world based on annual GDP, Australia is second only to Switzerland in wealth per adult citizen (ahead of the United States).
Blessed with vast natural resources, Australian mineral exports have made China’s rapid expansion possible, mostly thanks to their abundance of iron ore. The region of Western Australia is the largest iron ore producer and exporter in the world.
At the same time, Southern Australia’s big cities of Sydney, Melbourne and Adelaide have vibrant service-based economies. Sydney has some of the most expensive real estate in the world, with some homes selling in excess of $100 million.
When you consider all this, it’s mind-blowing to think that Apple’s market cap could soon be more substantial than Australia’s stock market. It’s not like Aussie stocks aren’t doing incredibly well lately, despite the horrific bush fires.
ASX Lacks Global Brands
Of course, there’s an explanation. Before we look at the fundamentals behind AAPL’s moon-trip, let’s take a look at three of the largest publicly traded Aussie stocks; Wesfarmers Limited, Woolworths Group Limited and Telstra Corporation.
If you aren’t from Australia, you’ve probably never heard of these companies (our U.K. readers might know the Woolworths’ name, but there is no affiliation with the collapsed British retail company.)
This is the biggest difference between the U.S. stock market and its Australian cousin. There are few truly global brands.
U.S. Has Three $1 Trillion Tech Giants
America’s big-tech companies – Apple, Microsoft and Google-parent Alphabet – all have more than $1 trillion valuations. Throw Jeff Bezos’ Amazon into the mix, and you have nearly $4 trillion among just four companies on the U.S. west coast alone.
America’s ability to create groundbreaking tech and captivating global brands are, of course, not the only explanation. While much of the world has struggled with moderate growth since the great recession, capital has continued to pour into the U.S. That’s because its relative economic out-performance and military might make it a dream place to park money.
AAPL Stock Can’t Help But Look Bubbly
Focusing directly on Apple, Steve Job’s funky alternative to Microsoft has been going from strength to strength of late. With strong sales in China and for its Airpod wireless headphones, investors can’t get enough AAPL.
Apple has also implemented a colossal stock buyback program during a period of relentless liquidity injections from the Federal Reserve. With nowhere else to go for yield, risk-taking has hit new heights as interest rates flat-line and global investors desperately seek returns in a historically low interest-rate environment.
When you tie it all together, the fact that Apple’s market cap is roughly the same as the entire stock market of one of the world’s wealthiest nations is both wholly reasonable and terrifying in equal measure.
This article was edited by Sam Bourgi.
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Last modified: January 22, 2020 11:38 PM UTC
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