Market wrap: Is the stock market slump nearing an end?

There has been a lot of celebration over the last week following the respective grand final wins by Collingwood and Penrith.

But the biggest celebration came from homeowners after the new Reserve Bank of Australia (RBA) Governor, Michelle Bullock, announced they would keep interest rates on hold at 4.1%. She stated that the pause would "provide further time to assess the impact of the increase in interest rates to date".

Recent data on inflation indicates that while inflationary pressures on the price of goods are easing, the cost of many services is on the rise.

That said, while the RBA believes inflation has passed its peak, it is still too high and will remain so for some time to come. They are anticipating that inflation will ease and gradually return to the target range of 2-3% by late 2025.

The recent rally in oil prices has resulted in higher fuel prices which is challenging the RBA's efforts to curb inflation. As Australia's economy continues to grapple with below-trend growth, I believe we will continue to be in a period of caution until the full impact of interest rate rises has been realised.

There are four key areas that the RBA will monitor to guide its future decisions on interest rates: the global economy, household spending, the inflation outlook and the labour market. On the last point, the unemployment rate is forecast to rise to around 4.5% by late 2024, which may indicate that rates will drop as wage growth will be impacted.

Overall, the current situation is a positive as the Australian economy seems to be stabilising. If we can keep our trade relationships healthy, especially with China, and manage any geopolitical events that arise, Australia will be well-placed for future growth. As our population increases, more people will enter the labour market, which will likely result in easing the cost of services.

I'm reminded that during these times, fortunes are made, as those who are wise buy good assets with a longer-term view. Essentially, they're buying tomorrow's returns today, which is in stark contrast to the masses who continually try to buy yesterday's return.

What are the best and worst-performing sectors this week?

The best-performing sectors include Real Estate, Consumer Staples and Healthcare, which are all just in the red for the week.

The worst-performing sectors include Energy down more than 5% followed by Materials down more than 2% and Consumer Discretionary down more than 1%.

The best-performing stocks in the ASX top 100 include Fisher and Paykel Healthcare up more than 3% followed by Northern Star Resources and Goodman Group, as they are both up more than 1%.

The worst-performing stocks include Mineral Resources down more than 9% followed by IGO and Pilbara Resources, which are both down more than 8%.

What's next for the Australian stock market?

As expected, the All Ordinaries Index experienced its third week down in succession moving to a low of 7,062 points. This level is significant as it is a strong support level for the market and, as mentioned previously, my target price for the fall.

That said, while the market may find support and start to rise again, this is not guaranteed.

While some levels are stronger than others, they are only a guide to where a stock or market may turn and so while we may see signs that the fall has ended in the next week or so, this still needs to be confirmed before we jump into the market.

That said, we don't buy the market, we buy stocks, and some will lead the charge. If a stock you are watching triggers a buy, there is a good probability you will do well.

I say this because while we may see further falls below 7,000 points, I do believe the end of the move down is either here or very close.

Either way, I believe October will close higher than it opened, but I do urge investors to exercise caution as we can't control the market, only our actions of buying and selling.

Given this, it's better to err on the side of caution rather than jump in early because you think it will be better in the future.

Get stories like this in our newsletters.