Why attitude makes more of a difference than who is president

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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 reins of the oval office on January 20. Despite this, during Donald Trump's reign, the Dow Jones Index grew more than 50%, so the question we need to ask right now is will the current bull market continue under Joe Biden and the Democrats.

While we could debate for hours the performance of the 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 more than 50%. 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?

joe biden dow jones market reaction

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 global financial crisis 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.

Best and worst performing sectors this week

While the Australian stock market has been down a fraction this week, in a good sign it has started to rise. Energy is the best performer up more than 4%, while Financials are up more than 1% with Communication Services just in the green. The worst performing sectors include Consumer Staples, Industrials and Healthcare, all of which are down more than 2% as of writing.

Not surprisingly, the best performers in the ASX/S&P top 100 stocks include Energy stocks with Santos leading the way, up nearly 20%, while Oil Search is up more than 18% and Woodside Petroleum is not too far behind up more than 17%. The worst performers include Link Administration down more than 16%, The A2 Milk Company down more than 10% and Magellan Financial Group down more than 8%.

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 of market sentiment. That said, following a strong rise in the first week of January with the All Ordinaries Index rising more than 2%, as Energy stocks soared, this week has been a little weaker. In the short term, our 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.

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Dale Gillham is chief analyst for Wealth Within (AFSL 226347). He has an Advanced Diploma and Diploma of Share Trading and Investment and more than 25 years' experience in the financial services industry.