What to expect from the Australian sharemarket in 2022


The events of the past two years have created a perfect environment for the growth of speculative investments with cryptocurrencies topping the list.

That said, as individuals are opting to work from home, it has meant they have more free time or, at least, more flexible time, which has resulted in many chasing other income sources with the stock market being the easiest and most attractive.

However, far too many are relying on chat forums or watching YouTube videos to get their next hot tip and I don't need to remind people how this usually plays out. While cryptocurrencies have boomed with a number of coin offerings, now non-fungible tokens have also become popular.

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Nevertheless, when it comes to investing, it is important to consider whether the investment meets a number of sound risk criteria regardless of the market, otherwise you are just gambling with your money. Sadly, this is what has unfolded for a lot of individuals over the last two years resulting in ASIC recently launching a crackdown on the ramping of stocks to unsuspecting investors.

Unfortunately, these same practises are also prevalent with crypto and coin offerings.

To reinforce the point of how speculative coin offerings can be, I was recently invited to invest in a coin offering that was listing at around $0.55. Today it is trading at a fraction of a cent and while they have tried to ramp the coin, which meant I could have made some good money, the risk of investing in the first place was just too high.

Remember, this market is not regulated, so you are taking some serious risks with your money.

Even when it comes to Bitcoin, where the majority believe they can't lose, it is not as exciting as you might think. Would it surprise you to know that anyone who invested in Bitcoin in February of last year would be losing or breaking even today? Yet, if you invested in January of last year you might be sitting on around 30% profit today.

That said, Bitcoin does look weak and is likely to fall further in the coming weeks and months, so it is likely any profits will be eroded. Therefore, even with the largest cryptocurrency, the buy and forget strategy is not the best approach. Investors need to be informed and educated to manage their risk regardless of the investment.

What are the best and worst performing sectors this week

The best performing sectors include Energy and Materials, which are both up more than 5% followed by Utilities, as it is up more than 3%. The worst performing sectors include Consumer Staples down more than 3% followed by Consumer Discretionary down more than 2% and Industrials down more than 1%.

The best performers in the S&P/ASX top 100 stocks include AGL up more than 15% followed by Woodside up more than 9% while Mineral Resources and South 32 are both up more than 8%. The worst-performing stocks include Reece down more than 8% followed by Sonic Healthcare and Domino's Pizza, which are both down more than 7% and Charter Hall Group, which is down more than 6%.

What's next for the Australian share market?

It is four weeks since I wrote my last report and it has certainly been an interesting time, as the All Ordinaries Index rose around 4% more than that time to a new all-time high of 7956 points on January 5, 2022. That said, the gain was pretty much eroded the next day when the market fell heavily, which indicates it is not as bullish as we might like to think.

Looking at the market on a daily basis is not a good idea and why I advocate that you need to look longer term to understand the bigger picture. For example, the highest weekly close on the All Ordinaries Index is still the week of August 13, 2021, at 7897 points.

Further our market has failed to close above 7826 points in the last 19 weeks, so investors need to be careful because while the market may appear to be bullish, it is not strongly bullish. Therefore, I would encourage everyone to exercise caution when selecting stocks.

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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.