Market Update – What to expect in the next week of trading?

After another week of heavy blows felt by the investing community , it is becoming very clear that we have not yet reached the bottom yet. The Aussie index is still down by 13.1% after last weeks horror show and “has slumped by more than 31% over the last twenty trading sessions” Steven Daghlian from CommSec.

On Thursday, the market hit 4-year lows as news broke that Qantas Airlines would be standing down more than 30,000 employees until the end of May, as well as implementing new travel bans in an attempt to contain the spread of Covid-19. Being Australia’s biggest airline, a hault on operations will have a strong ripple effect across the whole economy. In response to this, the Reserve Bank of Australia cut the official cash rate to 0.25% – which gives us a good indication of the current crisis we are in.

Key points to take into account before investing this week

Some investors may feel that they are drowning in an endless ocean of news surrounding Covid-19 and its flow-on effects on the markets. Below, I have summarised the key takeaways that investors should be most focused on, leading into next week:

  • Both the All Ordinaries & ASX 200 hit their lowest levels in four years on Thursday. We see this as a great opportunity for entry. However without any clear direction on how long this virus will impact the market, entering without expecting more losses would be unwise.
  • The $AUD hit its lowest levels in over 18 years currently priced at 57 US Cents. This shows investors are lacking confidence in our current market environment.
  •  Coles is looking for an additional 5000 workers to meet current demand for consumable products. Short term gain but both Coles and Woolworths remain overpriced in the current market environment.
  • Telstra has confirmed it will continue with its plans to rollout 5G networks in the coming months and it will be paying a dividend to shareholders next week. Telstra’s low Beta and consistent results have given investors a silver lining in an otherwise Bearish Market.

What can we expect for next week?

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.

Today, the only the reason the market is up is because both investors and speculators are buying companies with strong fundamentals at discounted prices. The current situation in Australia is becoming more significant, with non-essential businesses forced to close down. This alone will cost Australians their employment, income, travel and education as we prepare for a total lockdown. Under our research, we have come to the conclusion that the markets will not recover for at least a few months. These current restrictions set by the Government will smother the success of many local businesses, causing a chain reaction falling straight back onto the markets. Until the virus begins to slow it’s infection rate on a global scale, we WILL NOT see the markets recover. Expect next week to be another horror show, with some speculation from investors midweek. If you want to learn more on our investing strategy click here.

Stocks to look into?

Here is our free, uncomplicated, and extensive ASX portfolio

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.

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