What negative gearing changes could mean for your share portfolio

Negative gearing has resurfaced in political discussions, with Prime Minister Anthony Albanese suggesting that the Treasury might be reconsidering this long-standing property tax incentive.

However, Labor's bruising loss in the 2019 election still lingers, making it difficult to envision the government taking the gamble of upsetting property investors-particularly with the current housing crisis that we're in.

Politically, it seems like an improbable move. But since the topic is back on the table, let's examine the potential market impact if they were bold enough to proceed.

Removing negative gearing would likely cause a seismic shift in investor behaviour.

For years, Australians have viewed residential real estate as a wealth-building machine with a side bonus-tax minimisation. If that advantage were taken away, many of those same investors might start eyeing the stock market as the next best vehicle to grow their wealth.

For starters, dividend-paying stocks would likely see a surge in interest.

Take away the tax perks of negative gearing, and suddenly income-producing stocks like Telstra (ASX: TLS) and APA Group (ASX: APA) become a prime alternative.

These companies provide consistent dividends and could become even more attractive as a steady source of passive income without the headaches of dealing with tenants or property maintenance.

On the flip side, stocks tied to the property sector, such as Mirvac (ASX: MGR) and Stockland (ASX: SGP), could face headwinds.

A drop in property investor activity would likely slow down residential development, affecting these companies' bottom line.

Yet, given the political risks, I don't see Labor pushing for such a drastic change, meaning these stocks will likely continue to thrive.

Mirvac has been accumulating recently, following a strong uptrend from 2009. Any breaks above $2.40 could signal the next leg up, with targets of $4.00 in sight. Stockland has also been performing well, breaking above $5 and eyeing its GFC high of $8.80.

And then there's the broader question: if property lending takes a hit, what about margin lending in the stock market?

Negative gearing and margin lending aren't worlds apart-both involve borrowing to invest, whether in property or equities. A shift in property tax rules could open the door for further scrutiny of margin lending, potentially leading to adjustments there as well.

Ultimately, while Labor may flirt with the idea of ending negative gearing, the reality is that it's a political gamble they likely won't take.

But if they did, the ripple effects across the housing and stock market would be immediate and significant. Investors are adaptable, and they won't stay on the sidelines for long.

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

The best-performing sectors include Materials, up more than 6%, followed by Energy and Information Technology, up more than 1%.

The worst-performing sectors include Financials, down more than 3%, followed by Consumer Staples, down more than 2% and Communication Services, down under half a per cent.

The best-performing stocks in the ASX top 100 include Paladin Energy, up more than 21%, followed by Mineral Resources, up more than 17% and Whitehaven Coal, up more than 16%.

The worst-performing stocks include Commonwealth Bank, down more than 7%, followed by Coles Group and National Australia Bank, which are both down more than 5%.

What's next for the Australian stock market?

A wave of buying on Thursday helped the All Ordinaries Index recover the losses earlier in the week, nudging it slightly higher.

While the short-term bullish sentiment remains strong after an impressive September rally, the real focus should be on the medium to long-term outlook-especially now that the market has officially entered 'bull market territory'.

Here's why.

A bull market is typically marked by an index rising more than 20% from its low.

With the All Ords surpassing a 20% gain from its June 2022 low, we've officially entered this phase.

Beyond the textbook definition, there are other clear technical indicators: trading near all-time highs, check. Consistently making higher lows and highs, check. So, what can we expect as this bull market unfolds?

Historically, when the All Ords has risen more than 20% from significant lows since 2009 (excluding the GFC and the COVID lows), the index has continued to climb on average another 17% before facing sustained downturns lasting from three months to a year.

If history is any guide-and I see no reason why it shouldn't be, particularly with the bullish environment provided by the upcoming US presidential election and major shifts in interest rate policy by China and the US-the market is likely to continue rising, with a peak expected around 9200 points.

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