The best and worst performing sectors on the ASX this week

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We all know the saying that history repeats itself, yet when some mass event occurs we tend to think this time it will be different, which is even more prevalent in those who are younger or far less experienced. I say this because for centuries, the cycles of fear and greed in the stock market cause bubbles whether it is with individual stocks or markets and with every bubble there is the inevitable bust that leaves destruction and devastation in its wake.

In early 2018, the Bitcoin bubble exploded, yet only a few short weeks earlier the masses were saying this time it will be different. In the early 2000s, when the end of the tech boom was approaching, we heard cries that the old economy was out, and the new economy was in, yet only a short time later the new economy was in ruin.

The challenges with COVID-19 on our ability to work and our lives has now created another wave of new market participants with traders now speculating on apps that makes trading appear like a game as well as chat forums ramping up the price of speculative stocks. As always, it is the young or less experienced that are attracted to this in the hopes of making a fortune.

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Only yesterday, GameStop, which is a video game retailer, gained notoriety after retail investors in the US pushed the share price up around 1900% over the last three weeks (although as of writing the shares have sunk as trading platforms restrict trading on this stock). Surprisingly, an Australian stock with the same stock code, which is a mining company, has risen over 20% during the same time and over 50% in the last month, as retail investors bought into what they thought was GameStop. Again, history is repeating itself with the inexperienced falling prey to the herd mentality and while they may be making money now, history reminds us that this will change.

While the names and technology involved may be different, what has not changed is human psychology, as fear and greed is running the herd just as it has done in the past and will do in the future, in a rinse and repeat cycle. When it comes to the stock market, nothing replaces knowledge and experience and those who do not heed this advice are bound to fall into the same traps of those who have come before them.

Best and worst performing sectors this week

After being the worst performer last week, Utilities is the best performer this week up more than 1% followed by Consumer Staples up around 1% and Consumer Discretionary, which is just in the green so far. The worst performing sectors include Energy down more than 6%, with Materials down more than 4% and Industrials down more than 3%.

The best performers in the ASX/S&P top 100 stocks include IDP Education up more than 11% followed by Treasury Wines Estates and a2 Milk as both are up more than 5%. The worst performers include Ampol down more than 13% followed by Beach Energy, Oz Minerals and Oil Search, which are all down more than 8%.

What's next for the Australian share market

After a strong start to the year, the All-Ordinaries Index is now displaying weakness and is currently down more than 2% so far this week. In my last report, I indicated that the Australian market might peak this week and start to fall away, which looks to be the case.

I believe the fall will be short-lived with the All Ordinaries Index likely to travel down to between 6500 points and 6100 points over the next couple of weeks. As I have previously communicated, I believe our market will be bullish over the medium to longer-term with the market expected to make a new all-time high in March and then rising to between 7300 and 7500 points over the next couple of months.

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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.