We are currently encountering the worst market conditions since the two years spent going nowhere in 2022 and 2023.
I’d even classify the price action I am seeing in many stocks as worse than that period.
Don’t be fooled by the fact that the S&P/ASX 200 [ASX:XJO] seems to be treading water near its all-time high.
Beneath the surface, there is a bloodbath going on. I’m guessing you understand exactly what I mean if you are investing actively yourself.
A combination of the war in Iran and the capital gains tax changes is seeing a shift in investor behaviour.
I had a look at the top 200 stocks in Australia today, and a theme definitely jumped out at me.
If you are a member of an oligopoly in Australia or receive regulated revenue streams, you are doing just fine and even thriving.
Everyone else is on their knees.
So the banks, consumer staples, private health insurers, general insurers, and monopoly infrastructure are trending higher and holding up the whole index.
That could be partially explained by passive flows, but there is probably also a flight to quality.
The ASX 200 is currently just 5% below its all-time high hit in February this year.
The S&P/ASX Small Ordinaries Index [ASX:XSO] is down a whopping 18% since then and still looks poised to fall further.
Is this the CGT changes from the budget starting to play out?
The Iran war is muddying the waters because the spike in oil prices is feeding into a worldwide bond market sell-off.
US 30-year bond yields are punching above 5% and are about to hit levels not seen since June 2007.
The situation in Iran certainly doesn’t look great at the moment, and my guess is that Trump is kicking himself for opening this can of worms.
But if he has decided he can’t back down now, then we may very well see oil prices shooting through US$120 before long.
You can’t be involved in markets without suffering through periods of drawdown.
I’ve still never met a trader who can buy the low and sell the high.
The name of the game is to be aware that market conditions have changed and to batten down the hatches as much as possible while the situation remains uncertain.
Charlie and I discuss all of the above, so I hope you enjoy the show despite its dour tone.
Closing Bell
Regards,
Murray Dawes,
Retirement Trader, International Stock Trader and
Murray’s Trading Room
PS: In just one hour, I can show you how to get better at picking stocks… better at timing your entry… better at managing your risk… and better at knowing when to sell. You’ll learn all of this in my new online investing masterclass – free for a limited time. Go here for access.
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