Will the US Stock Market Surge Under Biden?

All things come to an end and regardless of what your thoughts may be about the US Presidency over the last four years, there will be another person taking the reigns of the oval office on 20 January. Despite this, during Trumps rein the Dow Jones Index grew over 50 per cent; so the question we need to ask right now is will the current bull-run on the US stock market continue under Joe Biden and the Democrats.

Do governments influence the stock market?

While we could debate for hours the performance of the US stock market under each political party, right now the statistics are inconclusive. That’s because under the Democratic led Obama presidency, the Dow Jones also rose over 50 percent. It may surprise you to know that the statistics are very similar to Australia as to whether the market performs better under a Liberal or Labour government.

So if the government of the day does not indicate how well a market performs, how do investors ensure they are investing at the right time so they can be profitable? Broadly speaking, there is no real good or bad time to be in the stock market, there are just better times to be in or out of the market. While it makes sense to be in the stock market when it is rising and to be out during times like the GFC or other market crashes, I would argue that for investors to continually make money, it is not about being in during good times or out during bad times, but rather having the right attitude towards investing.

Regardless of how much research is done by an investor, their inability to consistently profit comes done to the fears they hold, whether it is the fear of losing, the fear of being wrong or the fear of missing out, to name a few. Therefore, while there are macro-economic factors at play right now like the US Presidency, the COVID-19 pandemic and the strained Australian Chinese relationship, investors who have the right attitude will always profit more than those who do not. Remember knowledge is the enemy of fear.

What were the best and worst performing sectors last week?

While the Australian stock market ended the week down a fraction, in a good sign for the year, it is trading above where it started in 2021. Energy was the best performer up 4.08 per cent followed by Information Technology up 2.45 per cent and Financials up 1.29 per cent. The worst performing sectors included Healthcare down 3.44 per cent closely followed by Consumer Staples down 3.20 per cent and Consumer Discretionary down 2.43 per cent.

Not surprisingly, the best performers in the ASX/S&P top 100 stocks included Energy stocks with Whitehaven Coal up 12.97 per cent followed by Woodside Petroleum up 7.86 per cent while Santos and Insurance Australia Group were up 6.3 per cent.

The worst performers included Evolution Mining down 7.06 per cent followed by The A2 Milk Company down 6.67 per cent. Also down over 6 per cent were Xero, Magellan Financial Group and Adbri.

What's next for the Australian share market?

As the New Year starts to unfold and more volume comes back into our market, we will get more of an idea on market sentiment. In the first week of January the market rose strongly with the All Ordinaries Index rising over 2 per cent, as Energy stocks soared. However, last week the market was a little weaker early on before rising at the end of the week to close down just 0.53 per cent.

In the short term I expect the Australian stock market will fall away slightly into late January to mid-February, although it may rise for one or two more weeks before doing so. Overall, I believe our market will move to a new all-time high by the end of February and perform much better than it did last year. As mentioned in my previous reports, my preferred sectors for 2021 include Energy, Materials and Financials, and I expect that contrary to 2020, Technology will lag the market.

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.