Which ASX Stocks Will Outperform in Q3 2021?

Last week, the Australian Bureau of Statistics released some good economic data regarding our economy, reporting GPD growth of 1.8 per cent for the March quarter, which is ahead of expectations and much better than many other countries. With vaccines rolling out across the world, everyone is looking towards 2022 where it is expected that life will return to something more akin to normal. So, which stocks will benefit as the Australia market and the world opens again and which stocks are likely to continue to struggle?

Best and worst performing stocks in Q3 2021

Commercial real estate and shopping centres will continue to struggle, as we are now in the habit of working and shopping from home, therefore, in the next 12 months stocks such as Scentre Group and Vicinity Centres are unlikely to perform given that a lot of stores have closed while other businesses may be very hesitant to open up new stores. Travel stocks are also likely to underperform at least until mid-2022, given that restrictions around international travel are unlikely to change until well into next year.

On a positive note, online retailers should continue to do well and with less expenditure on overseas travel, consumers will continue to spend on items in Australia with JB Hifi, Kogan and Harvey Norman likely to be the winners. Australians are also more likely to favour driving holidays and weekends away over the next 12 months. Therefore, retailers involved in caravan, camping, sporting goods, four-wheel driving and other leisure activities are likely to do well, especially as we move into summer later this year.

Another area that is likely to benefit is companies that are being supported by growing revenues from offshore such as ResMed, Aristocrat Leisure and even the troubled Treasury Wines Estates to name a few. I will say one thing that is guaranteed as we move closer to 2022 and that is the economy will continue to change and shift to a new way of living.

What were the best and worst performing sectors last week?

The best performing sectors included Information Technology up 6.12 per cent followed by Consumer Discretionary up 4.02 per cent and Healthcare up 3.93 per cent. The worst performing sectors included Materials down 4.18 per cent followed by Energy down 2.21 per cent and Utilities just in the green up just 0.03 per cent.

The best performers in the ASX/S&P top 100 stocks include ResMed up 12.48 per cent followed by Afterpay up 10.51 per cent and The a2 Milk Company up 9.44 per cent. The worst performing stocks included Northern Star Resources down 13.91 per cent followed by Oz Minerals down 12.17 per cent and Newcrest Mining down 8.37 per cent.

What's next for the Australian share market?

For a second week in a row, the All Ordinaries Index has been relatively flat with the index barely in the green for the week up just 0.62 per cent. That said, it rose early in the week to achieve a new all-time high of 7,655 points by mid-week, which is just above my target of 7,600 points. As I said in my previous report, while it is possible the Australian stock market could trade higher, it is wise to be cautious and to prepare for the market to fall away anytime soon.

I still believe we are searching for the yearly high and if the market falls in the coming week, it may signal the start of the pullback I have been expecting, which is likely to be in the vicinity of 8 to 12 per cent. That said, since the COVID low in March of 2020, the market has had a mind of its own, so anything is possible. For now my advice is to exercise caution.

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.