When the sharemarket gets going arm yourself with a plan


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This year the world has been thrust into turmoil with growing fears around the full effects of the COVID-19 pandemic. Concerns are not just about our health, although understandably this is our immediate focus, but also the growing concerns among ordinary Australians around the global economic climate, and how we can secure our future, not just personally but as a nation. Right now, our security and safety are being challenged and these basic physiological needs have to be met in order for everyone to move forward.

There is an old saying that every cloud has a silver lining, but is there a silver lining in the situation right now? In my opinion, nothing gets people more motivated to change than fear and uncertainty, and you must admit that COVID-19 has certainly created a lot of that. Australians are experiencing a fear of the unknown because of the unpredictable nature of the current global situation. While we can all speculate, no one knows exactly where we will be in 12 months' time and what our personal lives will look like.

In the current situation, more Australians are starting to pay attention but, more importantly, they have become motivated to ask some tough questions. I am not just talking about health-related questions but questions about where their money is invested, what they should be investing in and how safe is that investment. Over the past few months, I have been inundated with those exact questions in addition to questions about how to profit more from the stockmarket, so they can secure an income stream if the climate does not improve.

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So what questions are you asking and what answers are you getting in relation to your investments, so that you can secure your future? Because, right now, it's important to understand your level of exposure to Australian equities, particularly if the stockmarket crashes again, as some experts are predicting. It is far better to take positive action and be armed with a plan in preparation rather than acting on fear, as this reduces much of the uncertainty we have been experiencing in 2020.

One thing is certain, the dark clouds will continue to roll in from time to time but the opportunity for you is in how you handle them. Making a choice to pay attention, and become educated and informed with a solid plan is not only wise, it will also ensure you will be confident about what to do when this occurs. In other words, it is far better to be educated and informed before the clouds appear rather than after.

So what are the best and worst performing sectors in the sharemarket this week?

While the All Ordinaries Index has been slightly bullish this week, it is far from convincing. As such, some sectors have risen strongly while others have not performed that well. Consumer staples has led the way up more than 4%, followed by financials up more than 3%, while consumer discretionary is currently up about 2%.

The worst performing sectors include communication services, which is down nearly 5% followed by utilities down around 2%, and information technology down more than 1%.

Looking at the ASX top 100 stocks, the best performers so far this week include Treasury Wines Estates, which is currently up more than 17%, Flight Centre up more than 15%, while Scentre Group and Unibail-Rodamco-Westfield were both up more than 10%.

The worst performers include Northern Star Resources down more than 11% followed by Seek Limited and AGL Energy, which are both down more than 8%. Telstra and Challenger are also both down more than 7%.

So what's next for the Australian sharemarket?

On Monday, the All Ordinaries Index rose 1.66% and it looked like the market would finally break out of the protracted sideways move it has been in over the past few months. However, being patient has paid off given that over the past two days the market has experienced some weakness yet again.

Last week, I indicated that the big end of town did not seem to be overly bullish and the events of this week have done nothing to change my view. For the Australian market to prove it is bullish, it needs to close strongly for the week, preferably above 6200 points. Failure to do this continues to indicate that the market is weak and will fall away some time soon.

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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.