Stocks and Property Crash in 2020: What Next?

In this week’s report, Dale discusses how Australian stocks and property have crashed in 2020, and the effect this may have on your retirement.

Will you have enough in retirement?

It has been a long held belief over many generations that we need to pay off our mortgage as fast as possible. As a consequence, it was common to find Australian’s in their 50’s and 60’s who had done just that, although it was also common to find that they had not planned for their retirement, as many were reliant on the aged pension.

But times have changed and property prices have soared over consecutive decades as a result of easier access to credit, not to mention the marketing hype around property encouraging individuals to borrow to buy bigger homes, pools, new cars and holidays to name a few. Now it is very common to find people in their 50’s and 60’s with significant levels of debt in the years immediately prior to their retirement, so it’s no wonder many are nervous about retiring.

If we look back at the GFC, many retirees and those close to retirement struggled after their superannuation plummeted as the Australian stock market fell with some even having to go back to work to survive. It is now ten years on and the corona virus crash has hit current retirees and those nearing retirement. So once again, many Australian’s in retirement or close to retirement may be faced with the conundrum of whether to continue working or returning to work to survive. Some may even need to sell down their assets if they want to retire.

With the concerns and restrictions surrounding the corona virus outbreak expected to continue for quite some time, analysts are predicting residential housing prices will fall in the coming year. There is already a significant increase in vacancy rates with rental properties in major cities as students, expats and others have left Australia. And those in debt who are nearing retirement may need to sell their property to pay off their debt and rent rather than buy, which may push property prices down even further.

While the corona virus has been devastating, the one thing I hope that changes as we move forward is a reduction in the level of debt in Australia because we cannot continue as we have in the past. As a country, it is important that we keep our debt levels low and plan for retirement earlier rather than later, as we don’t know when the next GFC or corona virus will occur.

What were the best and worst performing sectors last week?

While the market barely rose last week, six out of the ten sectors finished in the green. Materials and Communication Services were up over 2 per cent, while Healthcare was up 1 per cent, and Industrials, Consumer Staples and Utilities were up under 1 per cent. The worst sectors included Energy and Information Technology, which were both down over 2 per cent, while the Financial sector was down just over 1 per cent.

Looking at Australian stocks, Newcrest Mining topped the list up 9.53 per cent. Ansell was also up 8.13 per cent, while Northern Star and Orora were both up over 7 per cent for the week.

The worst performers included Challenger and Unibail-Rodamco-Westfield as both were down over 10 per cent, while Incitec Pivot and IOOF were down over 9 percent. Boral and Xero were also down over 8 percent for the week.

What's next for the Australian stock market?

Once again, the Australian stock market has been reluctant to push higher in a sustained move. Last week I indicated that the market needed to move above 5,623 to give us an indication that the bullish move is sustainable. While the All Ordinaries Index did try to push through this level on three occasions, it has failed to close above 5,600 points since 11 March.

Right now, I cannot say whether the market is bullish or bearish, although it will pick a direction very soon. If we look at individual stocks, while there are many that are showing strong signs, there are just as many displaying bearish signs. So, once again, I urge investors to be careful but, more importantly, be ready to buy if the market rises or to exit if it falls away. For now, I am sticking to the belief that the next move will be down and that price may fall below the low set back in March. That said, I would be very happy to be wrong with this assumption.

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.