Latest ASX Survey on Australian Shares, According to the Australian Stock Exchange (Australian Securities Exchange – ASX), nobody is buying shares anymore! This is despite the fact that the ASX200 is up 9.4% year to date, and the US S&P500 index is up 14.1% year to date. If nobody is buying shares, then who is benefiting from this phenomenal market rise?
Share ownership has been reported as declining from 43% in 2010 to 38% in 2012 on the heels of the European Sovereign Debt crisis. This statistic includes both direct share ownership and indirect share ownership. The latter reflecting stocks that are owned through funds management (ie superannuation).
There’s no doubting that Australians are finding the financial state of the economy is much tougher than during the booming period pre-Global Financial Crisis (2007/08), and this is effecting investor sentiment despite such a strong gain in stock values.
Reality is, that it is the long-term investors who have held their shares through the Bear markets, who are benefiting from this exceptional market rise. They’re not buying shares, but holding their existing portfolio, which is merely in recovery. They’re no better off than they were 3 years ago even though the stock market has recently pushed into new long-term highs.
Despite Thursday’s decline in the markets, the ASX200 is up a whopping 438 points or 9.4% year to date. If we continue on the same path through to the end of the year, that would equate to an approximate 22.5% gain. When you consider that the average annual gain over the last 20 years for the ASX is 8.7% p.a.*, this is an exceptional return. Especially when you consider the strength of the Australian Economy.
Can the ASX sustain this phenomenal rise?
Based on an expected GDP growth rate for 2013 of 3.0%, as noted by the International Monetary Fund (IMF) in their World Economic Outlook (WEO) released in April 2013, a stock market increase of more than 22% is a low probability of being sustainable. A 3.0% GDP growth rate would be considered an ‘average’ increase, whereas a stock market rise of 22% is more than double the average.
For this reason, our expectations are for the stock market to experience a retracement through the middle of the year as investors lock in gains made through the first half of the year. The “Sell in May & Go Away” scenario might actually come true, but we expect this to trigger more so in June and possibly be accentuated in July as investors sell stock in the new financial year.
Is now the time to be buying shares?
If our view is that the markets are potentially reaching a top, does this mean there are no new opportunities in buying shares in the coming weeks?
The way we approach our investment strategies is to “Trade the market movements”. We use stock and derivative strategies (also known as Options) to accumulate stock, create income from stock positions, to hedge our existing portfolio and to protect our investments against falling markets.
This might all sound a little too farfetched for the average person who is relatively new to the markets. But the fact is that with knowledge comes power, and the power of knowing what strategies to adopt to suit different market conditions means we have the ability to profit during any market direction.
So while nobody is buying shares at the moment, as outlined by the Australian Stock Exchange, we are busier than ever as we implement Covered Call, Protected Buy Write, and Hedged strategies in both the Australian and US stock markets.
Now is as good a time as any to be investing in the markets. Maybe not for the average person who fears a falling market. But certainly for the intelligent investor who is strategic in their approach to buying shares.
Matthew Brown – US Stocks & Options specialist
Halifax Investment Services
ASIC Australian Financial Services License Number – 225973
If you would like to learn more about the trading strategies you can use to profit from any type of market direction, visit www.australianinvestmenteducation.com.au or you can contact Matthew on firstname.lastname@example.org
Matthew is an Authorised Representative of Halifax Investment Services (Halifax). Halifax provides broker services, including Full Service and Discount Services using multiple trading platforms. For Discount platform services, Halifax charges the same fees for phone service as the online trading platform.