What, the markets are up again. Yet the exponential rise in COVID-19 cases (1.8 million) and deaths (100,000) continues.
Are you confused? If you are, you are not alone. Especially as some investors argue, the market is recovering. While other investors claim the worst, a depression is yet to arrive.
The ASX put on another surprising show this week, after closing 3.65% higher. The market sits at 5,387 points. Which is nearly a 20% gain since the false rebound began on the 23rd of March.
Do the past three weeks of consecutive gains mark the start of a recovery? Before we jump the gun, we must understand this week’s Market Sensitive Events (MSEs)/.
Because MSE’s provide investors with an explanation for why the market moved up/down for the week.
Market Sensitive Events – Last Week 6/4/20 – 9/4/20
- The Morrison government announced that childcare would become free for all Australian families.
- The OPEC nations, Saudi Arabia and Russia, were finally able to agree on reducing the global oil supply by 20%. Which should push up oil prices.
- Bernie Sanders’s exit from the U.S. Presidential race, on Wednesday, saw the Dow Jones rise by more than 700 points.
- The $AUD rose by 5%, to 63 U.S. Cents, within the space of 4 days.
- The number of new national COVID-19 cases fell to 37 on Thursday.
- The government’s stimulus packages and the RBA’s use of Quantitative Easing is creating the allusion of economic security.
- The UK endured its most deadly day on Tuesday. With 934 people losing their lives.
- Unemployment in the U.S. is 16 million. Which exceeds unemployment during the GFC.
- 1/3 U.S. households failed to pay their rent on time last month.
- Mortgage application rates fell by more than 1.9% during March.
- According to Digital Finance Analytics, national median house prices fell by more than 15% since the beginning of the year. DFA suggests that property prices could possibly plummet another 30% as investors bail out of the property market.
Could the market climb higher this week?
Before I start, I am obliged to remind our viewers that this is not advice, only general commentary from my extensive research into this area.
In short, I expect the market to climb even higher this week. The past two weeks of growth are luring an unprecedented number of new investors into the market. Ultimately, allowing ‘FOMO’ to drive up the ASX. The following metaphor summaries the imminent future nicely, “timid mice entered the market only to be swallowed up by big cats (big institutions)”.
Moreover, there are no positive fundamental changes in the economy to justify a bullish outlook. Unemployment is surging, COVID-19 cases and deaths are surging, and the number of renters making late payments is surging. Thus, if you cannot justify why the market is up, then I would suggest that you do not invest. Instead, develop a long-term investment strategy.
Nonetheless, it is crucial to keep up to date with the COVID-19 impacts.
COVID-19 cases and Deaths
The number of coronavirus deaths and cases are expected to surge during the week. Especially for the U.S, as they became the first country to experience 2000 deaths in a day. However, any negative news surrounding COVID-19 will likely not impact the market. Because the current sentiment is that the federal reserves printing machines can outlive the virus and solve the crisis.
US Earnings Session
During this week, all public companies in the U.S. will be releasing their financials for the March quarter. There is a high chance that most US companies will post lower earnings. Weak financials could trigger another sell-off. In turn, providing many investors with an opportunity to snap up quality stocks at a discount. Especially in the travel, retail, and property sectors.
Also, with many US companies withdrawing their earnings guidance for the rest of 2020, the stock market is even more uncertain. Bringing us back to the question, that if the CEO’s, CFO’s and COO’s don’t even know the future financial performance of their company, why are investors buying stock?
Local Jobs Data
The ABS is releasing Australia’s unemployment figures on Thursday. Many analysts are forecasting the unemployment rate to jump to 5.4% as a result of the loss of 30,000 jobs. It will be interesting to see if a spike in unemployment can bring down the ASX. Because it seems like no matter how bad the news is, the force of FOMO is just too strong.
Stocks to Watch in the Coming Week
|Stock||Trading Price ($AUD)||Thursday Gain (%)|
|PERENTI GLOBAL LTD||0.78||27.64%|
|SOUTHERN CROSS MEDIA GROUP L||0.13||18.18%|
|CREDIT CORP GROUP LTD||16.28||11.74%|
|SKYCITY ENTERTAINMENT GROUP||2.12||11.58%|
|SEVEN GROUP HOLDINGS LTD||14.03||11.17%|
Here is our free, uncomplicated, and extensive ASX portfolio
- Could these micro-caps provide an upward return of 500%
If you enjoy our articles or are wanting to learn more, you can subscribe to us for free via email and get updates when we post new articles. From all of us at YIG, thank you for the support.
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 Patrick McLoughlin and Sergeo Domtchenko, Senior Manager, and Associate of YIG.