Aussie shares tipped to rise further despite recent turbulence
Despite the Australian stock market showing “a sea of red” last week, the outlook for Australian shares is still strong, with the market expected to reach a new high in the next month, says an investment analyst.
Wealth Within chief analyst Dale Gillham said investors were fearful last week following the escalation of the US–China trade war and talk of a potential US recession.
Mr Gillham said investors were unsure whether they should sell their shares and buy them back later or just ride out the falls in the market.
Over the past seven months, the All Ordinaries Index has been incredibly bullish, he said, making consecutive highs without any real pullback, which has not occurred since the move out of the GFC low 10 years ago in March 2009.
“As a consequence of the sustained rise, many investors have flooded into the stock market, and with every interest rate fall, more investors have joined in the hopes of higher returns,” he explained.
“It is important to remember that all markets fluctuate, with any rise or fall acting like a staircase where prices rise and then stabilise before moving higher. This year, however, the rise has been more like an escalator going to the top floor.”
Mr Gillham explained that the fall in the market seemed to be caused by a combination of both reporting season and President Trump’s imposed tariffs on Chinese imports that sent the market into a state of flux, resulting in a global sell-off of equities.
Consequently, many investors, he said, are asking about whether they should be worried about further falls.
“Despite what unfolded this week, my outlook for the Australian market remains bullish over the medium to long term,” he said.
Mr Gillham noted that there has been some positive news this reporting season despite the heavy market sell-offs.
“Shares in real estate giant Mirvac rocketed this week after reporting an increase in its operating profit of $631 million, which is up [by] 4 per cent on the previous year,” he said.
“Suncorp also recorded impressive full-year results with revenue of $15.5 billion and a final dividend of $0.44 cents a share. Despite falling heavily earlier in the week, it weathered the storm in the market and rose to regain lost ground.”
He also pointed out that Commonwealth Bank released better than expected news despite reporting an 8 per cent decrease in net profit to $8.6 billion.
“This was largely due to the bank deciding to leave dividends unchanged at $4.31 a share. Despite what has unfolded with the royal commission and the banks this year, this is a good result for CBA shareholders,” he said.
“Both CBA and Westpac are my preferred banks for those looking to gain exposure in the financial services sector over the medium to longer term.”
He noted that there were some results that weren’t as positive, with AGL shares, for example, down around 7 per cent this week after flagging future headwinds that are expected to negatively impact their bottom line.
“There is on old saying that wealth is the transfer of money from the ignorant to the well informed and, in the current market conditions, this saying really rings true. Anyone can make money in stocks when the market is rising, but it is those who are educated that profit when the market is volatile,” Mr Gillham said.
“Regardless of what has occurred this week, my opinion of the Australian market has not really changed. While the high of 6,958 points that occurred on 30 July could be the high in the current bullish move, I am not discounting that the market will continue to rise to a new high over the next month before it pulls back into its yearly low, falling around 8 per cent to 12 per cent sometime in September or October.”
He also predicts the bull market will return and 2020 will be another bullish year for the Australian stock market.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.