Shareswatch Australia

For the last few years I have been warning that steps needed to be taken to prepare the Australian economy for when the commodities cycles would turn downwards. Back when I first started writing about this, it was almost considered treason to even suggest the mining boom may draw to a close. But these days even the RBA, Treasury and Wayne Swan are talking about the end of the commodities boom.

At the moment there is so much confusion across the global markets that is makes me less reluctant to take long term positions. One day we see Chinese trade data which appears good, but there are questions about its reliability. Over in the U.S the economy appears to be improving, but what will happen when the Fed starts to wind back quantitative easing measures? Meanwhile in Japan, Abenomics is shaking up the markets and there is considerable pressure on leaders across the EU to ease up on austerity measures.

The Australian stock market has posted some good gains recently with the ASX All Ordinaries Index and S&P/ASX 200 Index both closing above 5100 yesterday. Instead of the markets showing some weakness as I expected, they appear to be rallying even despite falls in commodities prices and warning signs that the Chinese economy may start to slow again. This makes it difficult to get a feel for where the markets might be heading and economic stimulus measures in the United States, China and Japan complicate the outlook even further.

The Australian stock market appears poised to head lower this week and there are signs that the rally which started in the middle of 2012, is turning into a decent sized correction. Over the next week or so the key areas to watch will be the mining stocks, banking stocks and gold prices. But already if we look at some charts in these areas we can see a trend developing.

According to data released the other day, the Australian economy created around 70,000 positions recently which apparently is very good according to most economists. This is despite the fact that most of the jobs were part-time roles and I saw no breakdown regarding what type of jobs were created. That doesn’t seem to matter, once the media and assorted experts say it’s time to cheer then we are suppose to cheer.

Since mid 2012 the Australian stock market has been on a roll with the ASX All Ords & S&P/ASX 200 both closing today above 5100 points as the bull market continues. When I last looked at a few 52 week high and low stock prices the All Ords/ASX 200 were around 4300 so not surprisingly most stocks are now trading much higher and investors generally should be a happier lot than they were back then. However some stocks have actually fared relatively poorly since October 2011 and this may help us understand what might be moving the stock market at the moment.

Recently every move upwards the stock market takes, no matter how slight, is greeted with almost ecstatic cries of joy from many analysts, finance journalists and assorted market watchers. It’s as if the ASX All Ordinaries was heading towards a new high and investors were being showered with money in the midst of a raging bull market that had no limits. Certainly there have been good returns of late for those investors who timed their entry into market almost perfectly, but for longer term investors it’s more of case of here we go again.

Back in May 2012 when I last reviewed the performance of the Shareswatch Random Stocks Portfolio the S&P/ASX 200 (XJO) closed at 4165. On the 25th January the ASX 200 closed at 4835 which means the XJO has risen by around 13.85% since the last review.  So it will be interesting (for me at least) to see how this randomly selected collection of stocks has been performing against this ASX 200 Index.

Today I am going to review the 1 year performance of three ASX listed blue-chip stocks namely: the Commonwealth Bank of Australia (ASX:CBA)  BHP Billiton (ASX:BHP) and Telstra Corporation (ASX:TLS) to get a feel for how these large companies within the S&P/ASX 200 Index fared during 2012.  Does the performance of these stocks give us any indication of how the wider stock market may fare in 2013 and if so, are these stocks worth watching over the next 12 months?

Once again it is time to dust off the crystal ball, stick a finger in the air and toss some chicken bones over my shoulder in a vain attempt to forecast what the Australian stock market will do in 2013.  Last year the ASX All Ordinaries and S&P/ASX 200 posted respectable gains, but will they do so again this year?

In 2012 the Australian stock market finished the year higher with the ASX All Ordinaries Index posting a gain of around 12% to close at 4663.30 points.  Unsurprisingly much of the financial media excitedly churned out headlines suggesting stocks were soaring and many commentators focused on the annual rally being the best since 2009.  However if we look past the nonsensical rambling of much of the mainstream media the reality is  that All Ords has in reality simply moved back up to a level below where it finished at the end of 2009 and is still way below the pre-GFC market high.

As we approach the end of the year, the annual topic of a “Santa  Rally” rears its head and although I don’t believe Santa can rally stocks, I do wonder if the current upwards trend of the Australian stock market can be sustained for much longer. Will the S&P/ASX 200 finish 2012 on a high, or will slide back and finish well below 4500.

Finally it seems the Reserve Bank of Australia and Treasury have had to accept that the mining boom has peaked or is peaking, which is something I have been talking about on this site for some years.  However the RBA, Treasury and Gillard Government all still appear to be relatively upbeat about the outlook for the Australian economy next year which is surprising,  since I don’t see a lot to be optimistic about as I review the stock market, housing market or a few other economic indicators.

I will quickly review four very different ASX listed stocks to see if we can draw any conclusions from how their shares prices have been moving.  The stocks I will look at are AGL Energy, Cedar Woods Properties, Domino’s Pizza and Skilled Group.

The Australian stock market closed up again today with the ASX All Ordinaries Index finishing at 4550.90 points – a rise of 0.82% for the day.  The last couple of months have been generally kind to Australian stocks but we need to keep this recent stock market movement in perspective.

In the last 12 months, shares of the Australian S&P/ASX 300 healthcare index (comprising 22 companies) have risen faster than their counterparts in the industrials and energy sectors. While this is in part caused by the downturn in the commodity markets as the world grapples with the European debt crisis and a slowdown in China, the healthcare group, notoriously a defensive sector, has also shown resilience despite challenging market conditions.