Shareswatch Australia

The Australian stock market has finished trading for the year with the ASX All Ordinaries & S&P & ASX 200 both closing around 15% lower for 2011. It has been a disappointing year for share market investors (yet again) with even the mining stocks stumbling lower over the last 12 months. Many investors might be under the impression that the market slid back over the last few months of 2011, however the Australian stock market has been trending down since as far back as April.

If you were to believe some of the ramblings on mainstream media sites you might get the impression that Australian stocks have on occasions bounced back strongly and that in some way this is a reflection of how well the Australian economy is doing. However the reality is that the Australian stock market has been trending downwards since July and many stocks are simply limping from one week to the next.

Over the last few weeks the tragic events in Japan and the political unrest in the Middle East have shown just how fragile the Australian stock market is. Investors appear ready to move quickly out of shares and shift funds to less riskier assets when they sense trouble. This suggests to me, that people don’t quite believe that the Australian economy is as robust as many market commentators would have us believe.

Despite a fairly nasty stock market correction over the last few weeks the Australian market did not fall anywhere near the lows of March 2009 and as I have been saying for nearly a year, we won’t see those levels again for some time,  if ever.  So now that the market correction appears to be over, what are stocks, oil and gold prices likely to do during the next few months.

Stock markets around the world have had a very volatile run over the last few weeks with everything from debt levels in Europe to housing statistics in the U.S.  giving scaring investors. But during times of market volatility it is important to try and spot the longer term market trends and not get carried away by sensational headlines or daily market swings.

For more than a week investors have been watching stock markets across the globe drop sharply as concerns over debt in Europe have raised doubts in people’s minds that a global economy recovery is really taking shape. But is the current correction really that bad, and is there a chance that stocks have fallen too far, too quickly?

One question that investors need to consider amongst all this market turmoil is; has the dream run of the Australian stock market come to end? Perhaps for example the days of the Australian market (ASX) outperforming the Dow Jones Index are over and we need to be prepared for less glamorous returns? We might even have to put aside our patriotic feelings and look offshore for better returns in the future?

One of the trends this year is that the Australian stock market has followed the lead from the U.S markets more directly than in previous years. Of course our stock market has always been influenced by the movement of the Dow Jones Index, but it is easy to forget that Australian stocks have often held up much better than those in the U.S. In particular, over the last 5 years our stock market has been a great place to invest largely due to the boost from the commodities boom and record profits in the financial sector.