The ASX 200 went through a week of extreme turbulence; rebounding between significant gains and losses leaving investors lost for answers. However, on Friday the 13th the ASX finished nicely in the afternoon firming to a 4% gain. In similar fashion, the Dow Jones finished on a 9% high, a spectacle considering investors have been wary of investing over the weekend period.
Fridays market analysis – what does this mean for next week?
On Friday, the ASX 200 opened lower than expected with the index falling by 430 points (8%) as a result of the 10% decline on Wall Street the night before. However, at around 2:00 PM (Sydney EST), the markets started to gain traction on the back of news that the RBA injected around $8 billion into the credit markets. On top of this, the Democrats and Republicans came together and are one step closer to delivering a stimulus package for the U.S. economy. The gains on the ASX 200 can be largely attributed to the strong performances of the health, energy, communications and financial sectors, rising by 10.6%, 8.26%, 3.73% and 3.5% respectively. Below is a table that represents some of the biggest gains across the stocks on Friday.
With the current volatile nature of the market, it’s almost impossible for the average investor not to feel a sense of motion sickness. Moreover, most people will probably be wondering, “How will the market behave next week?”
Where does the market go from here?
Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.
Personally, I would be very surprised if the market didn’t finish in the red at the end of Monday trading. Speculators are likely to bail out on the news that the Formula One Australian Grand Prix and the Royal Sydney Easter Show have been canceled entirely. These next two weeks will be rough as the Australian Government continues to contain the virus internally, which will cause a short term effect on wages, employment, education as well as the effect on revenue for industry specific companies (Entertainment and Tourism). Entering the market next week holds some significant risks, Systematically and Un- Systematically if you are looking to buy “cheap” stocks that are in Industries that will be directly or indirectly effected over the next 6 months.
If COVID-19 news remains tame over the next week due to successful containment, we may see some momentum begin to build as investors will start snatching up Blue Chips at discounted prices. However, if Australia or the USA fails to contain the virus, then a recession will be more likely than not. The biggest concern for the economy is Australia’s unnaturally high inequality levels, meaning if the virus becomes uncontainable it will heavily effect the jobs of people currently employed as casuals or who are in industries that are of high risk to closure. This ofcourse is just within the Australian economy, with tensions between the U.S, Russia and Saudi Arabia, economists are concerned that we may enter a negative global GDP. We have not reached the bottom of the pit as they call it, with the process of global containment comes patience and discipline from all Government parties.
According to Morgan Stanley’s chief U.S. equity strategist, Michael Stanley, “A recession is a greater likelihood because the outbreak of the COVID-19 has spread to more than 100 countries, and has all but shut down major industries including airlines and cruises and is threatening to deliver shocks to other areas of the economy”. However Wilson says that he expects the recession to be short-lived and sees the S&P 500 hitting 2750 points by the end of the year. We will be covering this current situation with our team working around the clock to give you the best free information anywhere. Make sure you subscribe down below to be notified when we post.
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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by Sergeo Domtchenko, Associate of YIG and Tyger Fitzpatrick, Founder.