How Much Further will the Australian Stock Market Fall in 2020?

This week, Dale analyses how much further the stock market may continue to fall, as well as the top 20 ASX stocks to watch once the pull back is finished.

The internet super highway just keeps getting faster, which has the potential to make our lives better and more efficient. Companies that have taken advantage of this growth have grown at staggering rates like Apple, Amazon, Facebook and Google to name a few.

Apple has sold billions of iPhones since it launched back in 2007 and just a few short weeks ago, it released its first 5G phone, which opens up a world of possibilities for future applications. While many consumers don’t have full access to 5G, the technology is here to stay and overtime it will take over 4G.

By all accounts 5G is a game changer, as it will allow many more applications, services and products to enter our daily lives from providing high speed camera surveillance in our streets to keep us safe, to doctors being able to view data, run tests and even operate remotely. For investors, 5G will bring with it a new generation of products and companies that could prove to be very profitable.

So where do you look for the next Apple or Google? This is a million-dollar question and one that we cannot answer easily right now, given that not every company that invests in new technology will succeed. Even Steve Jobs, in his early days of Apple, could not have contemplated where his company would end up.

In my opinion, I don’t believe telco’s will be the companies that benefit the most from 5G, instead it will be smaller companies with entrepreneurial minds in the areas of education, financial management and health. That said, there are many other areas that are set to benefit from the rollout of 5G, therefore, it is our job to keep an eye out for those that may just be game changers.

So what were the best and worst performing sectors last week?

The market was bearish with all sectors ending the week in the red with Consumer Staples the best down only 0.05 per cent followed by Healthcare down 2.49 per cent, while Utilities, Communications Services and Financials were both down over 3 per cent. The worst performing sectors included Energy down 6.63 per cent followed by Industrials down 5.98 per cent and Consumer Discretionary down 5.52 per cent.

Looking at the ASX top 100 stocks the best performers included Coca-Cola Amatil followed by AMP up 12.92 per cent and ResMed up 8.47 per cent. The worst performers included Flight Centre down 15.84 per cent, Oil Search down 11.38 per cent while Aristocrat Leisure and Worley were both down over 11 per cent.

So what's next for the Australian share market?

October is prone to surprises and last week was no exception, given that the All Ordinaries Index fell over 1.5 per cent on two separate days and fell on four out of the five days with the market now trading at levels it was in May. This has put the market back into the sideways move we have been experiencing for nearly six months. Since the end of May, the Australian stock market has risen just under 5 per cent and after last week, it is not looking strong. This may be due to the Presidential election being in its final stages, as the world waits for the outcome before deciding what the markets will do.

Given the strength of the down move last week, the probability of further falls is likely, although I believe any fall will be short lived with the fall to likely to be between 5,500 and 6,000 points. While I am still of the opinion that our market will rise into Christmas and beyond, given the current volatility it is important to remain cautious, as anything could occur. Right now, it is wise to sit and wait for the dust to settle on the Trump-Biden election but at the same time get ready for the opportunities that will unfold in the not too distant future.

For now good luck and good trading.

RESOURCES & LINKS:
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