Australian Share Market Surprisingly Bullish

Many are advocating that the government released one of the most important Federal budgets last week although the response by some has been negative, as they are suggesting we have taken on too much debt and that it is unlikely we will see a budget surplus for quite some time. While some would argue that this budget was necessary to enable the economy to grow over the coming years, others are suggesting it will benefit middle-and upper-income earners more with the great divide between those with plenty of money and those without only widening. But will this really eventuate?

Your attitude towards money can influence your wealth

Having helped thousands of Australians to understand money, investing and creating wealth for retirement, I have found that the reason the divide between those who have money and those who don’t is almost entirely down to how we think about money and building wealth, and no budget can change that.

History shows that if you had parents who were financially smart and taught you their good habits, you have a much higher chance of accumulating wealth. Others suggest that your ability to build wealth comes down to how much you earn but this could not be further from the truth because in my experience it all comes down to how we think or our attitude towards money.

In last week’s report, I indicated that the low interest rate environment was a perfect opportunity for people to reduce debt and take advantage of the investment opportunities that are present right now. While everyone can do something, even something small to better their financial situation, a lot of people will decide not to take advantage of this opportunity, which is why I say it all comes down to the decisions we make.

In my opinion, the Federal Budget has only made the opportunity better for everyone given that those who are working will receive a tax cut and those who are not will be supported to find employment. Those who choose to use the personal tax cuts to reduce debt or invest will be much better off in the long run. So, if you want to be one of those who moves from being the “have nots” to the “haves”, it is as simple as making wise choices today, which will ensure your tomorrows are better.

What were the best and worst performing sectors last week?

In a surprisingly strong week in the Australian stock market, Energy was the best performer up 9 per cent while Information Technology was up 7.78 per cent, Financials was up 7.54 per cent and Materials was up 5.24 per cent. The worst performing sectors included Utilities up 2.02 per cent while Communications Services was up 3.03 per cent and Consumer Staples was up 3.74 per cent.

Looking at the ASX top 100 stocks, the best performers included CIMIC Group up 20.42 per cent after jumping over 9 per cent last Friday following its latest market outlook. While profit was down due to COVID-19, the outlook is expected to be positive. Virgin Money was also up 20 per cent after announcing it would reduce its workforce by 400 jobs in the UK and speed up its integration with CYB bank.

Other top performers included Northern Star Resources and Downer EDI up 15.58 and 15.42 per cent respectively with Oil Search not far behind up 14.68 per cent. The worst performers included Transurban Group down 0.92 per cent, Newcrest Mining down 0.10 per cent while Whitehaven Coal, Telstra and AGL Energy all broke even for the week.

What's next for the Australian share market?

I know I have said before that a week can be a long time in the market and last week was no exception. In the prior week, we were looking at the market falling after it showed weakness following the announcement that President Trump was diagnosed with COVID-19. A few days later, the President was out of hospital and, as a result, the Australian market moved up last week in its strongest rise since May.

Many are now asking whether this strong move up is sustainable or is it another sucker’s rally. While it is possible that the All Ordinaries Index has already traded down to the low I was expecting and, therefore, will continue to trade up, there is still a good probability that this is just a sucker’s rally before the market continues to fall away. Either way, we will know the answer this week.

If the market trades up and closes above 6,400 points this week, we are likely to see further rises up to Christmas. If it fails to break above this level and falls to trade under 6,000 points, I expect the market to trader lower over the next few weeks to below 5,800 points and possibly as low 5,400 points.

For now good luck and good trading.

Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of the award winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good book stores and online.