How the stockmarket is faring a year since COVID-19 struck


Just over a year ago, the nation was plunged into uncertainty as COVID-19 started to take hold, forcing almost everyone into lockdown. Prior to this, the Australian economy had broken records for the longest uninterrupted economic growth in the developed world before falling into a technical recession.

As a nation, we banded together and the economy is now booming with GDP growth in both the September and December quarters, and with only a few weeks left in the current quarter we are set to make it three in a row. The ABS statistics show that household and online spending is up, while the housing market is booming. Given this, you may be asking why with all this good news is the stock market not rising strongly.

Historically, since the low on our market following the 1987 crash, the All-Ordinaries Index increased at a rate of 0.52 points per day up to the all-time high achieved in February 2020. Looking at the move up from the COVID-19 low in March 2020, we can break this past year into two parts. In the first 22 weeks since the low, the Australian market rose at a rate of 12.59 points per day and in the 25 weeks since that point to the recent high on February 17, it rose 4.78 points per day. To put this into perspective, the rise out of the March 2020 low was around 30% faster than the rise up from the March 2009 low following the GFC.

a year since covid sharemarket

Given this, the All-Ordinaries Index is still moving quite fast despite the fact it is showing signs of slowing down. In fact, a statistic that may shock some, the Australian market together with South Africa continue to be the best-performing stocks markets in the world and have been for over 100 years. Based on this, you have to wonder why so many are choosing to invest in the US market.

Best and worst performing sectors this week

In yet another flat week for our market, Consumer Discretionary has led the way up more than 2% followed by Industrials up more than 2% and Utilities up more than 1%. The worst performing sectors include Energy down more than 2% while Information Technology and Materials are down more than 1%.

The best performers in the ASX/S&P top 100 stocks include Treasury Wines Estates up more than 11% followed by Appen, which is up more than 10% after Director, Mark Brayan, increased his shareholding by exercising some of his performance rights. That said, while the price rise on Appen looks good, I believe there is a further downside for this stock. Aristocrat is also up strongly, rising more than 8%.

The worst performers include Santos, which is down more than 7% followed by Fortescue Metals down more than 5%, and The a2 Milk company, which is down more than 4%.

What's next for the Australian share market

I feel like a broken record, given that we have experienced another flat week on the Australian market and a flat start to the year with the All-Ordinaries Index rising less than 2% since January 1. It has also fallen more than 3% since the high on February 17 and it is not looking strong in the short term.

It will be interesting to see where the Australian stock market closes on Friday, given that over the last two weeks it has closed around 6940 points. If we see a low close on Friday again, it will add further weight to my prediction that the market is falling into the low I was expecting a few weeks ago.  Although, as I said last week, we need confirmation of this, which will occur if the market trades below 6770 points.

It is possible that the market will break out of the pattern it is currently in very soon, and if the move is down, we need to be prepared for the fall to unfold over four to six weeks into mid-April and for the market to trade down to below 6500 points. As I have stated previously, now is not the time to be entering the market, as investors would be better off waiting for the next confirmed run-up.

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Dale Gillham is chief investment analyst at Wealth Within Limited (AFSL 226347). He also serves as the head trainer at the Wealth Within Institute (RTO 21917). He has more than three decades of experience in the investment industry, and is the author of How to Beat the Managed Funds by 20%, Dale's qualifications include an Advanced Diploma and a Diploma of Share Trading and Investment. He co-hosts the Talking Wealth Podcast, and his work has appeared in The Australian Financial Review, New York Business Journal, Wall Street Select and more.