How worried should you be about rising interest rates?
It seems the rhetoric about the stock market that was being pushed heavily late last year by market experts is still on the agenda. Early in 2022, we were told the stock market was crashing, yet this didn't occur. Now the story is all about interest rates, inflation and a recession, which is causing concern for many people. So, should you be concerned or is this a time of opportunity?
Those who have been following my reports for quite some time know that I like to take a contrarian view, which was evident last year when I communicated that the Australian stock market was not going to crash. While I acknowledge the market did fall around 15% by June, this is a bear market not a market crash and since July 1, 2022, the market has risen around 11%.
As for this year, I have a very similar view to what I communicated in 2022. Yes, it is highly likely that interest rates and inflation will rise, although I believe the worst is over or very close to being over. History dictates that when they finally call a recession, generally the economy starts to improve. So, while interest rates and inflation may move up in the first half of 2023, I believe they will start to move back down in the second half.
It's important to remember that the stock market is a leading indicator of the economy and even though it has been volatile in the last six months, it is undeniably moving up and has been since the low in June 2022.
This alone is reason to have a positive outlook, as it is also pointing to 2023 being a time of opportunity for those who don't get bogged down in the current message of doom and gloom.
Right now, it's time to be cashed up and ready to take advantage of the many investment opportunities that will come not just this year but in the next few years.
The best and worst performing sectors this week
The best performing sectors include Materials up more than 3% followed by Energy and Consumer Staples up more than 2%. The worst performing sectors include Utilities down under 1% followed by Information Technology, which is just in the green and Healthcare up more than 1%.
The best performing stocks include Block and South 32, which are both up more than 7% followed by SEEK and Mineral Resources, as they are both up more than 6%. The worst performing stocks include Computershare down more than 5% followed by Whitehaven Coal down more than 4% and Suncorp down more than 2%.
What's next for the Australian stock market
They say January is a good indicator as to how the stock market will unfold in the coming year and while I generally don't like these clichés, so far January is shaping up to be a great lead into 2023. So far, the All Ordinaries Index is up more than 3% for the month and I am expecting it to trade higher.
In my last report of 2022, I mentioned that while investors may be concerned about the Australian stock market and the economy in 2023, I did not believe they need to be overly worried. I also suggested that the current move down was a normal part of market cycles and I did not believe it would fall much further. While the move down went a little longer in time than anticipated, the market is unfolding as I expected.
Based on the charts, the Australian stock market is expected to trade higher over the next four to eight weeks up to around 7800 points and possibly challenge or break the previous all-time high of 7956 points set back in January 2022. Rather than being gloomy about the economy, right now is an exciting opportunity to buy good stocks at cheaper prices and set yourself up for 2023.
Get stories like this in our newsletters.