Red alert after worst week in a year

Woolies, Wesfarmers, banks all headed south.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Last week marked the worst week in over a year for investors, as the Australian dollar slid to as low as $US0.96 on Thursday and the S&P/ASX 200 (^AXJO) (ASX: XJO) fell a total of 3.8%, putting the share market on high alert.

Prior to last week, the index had climbed roughly 27% in the past 12 months from just above 4,000 points to 5,180.8. During the week, it conceded 197.3 of those points amidst various global reports.

The Australian market wasn’t the only victim, as other markets around the globe also experienced heavy turbulence following suggestions from the Fed Chairman Ben Bernanke that that he would cut back on US bond buying when the US labour market begins to see sustainable improvement.

A report outlining Chinese manufacturing levels also displeased investors with a sharper than expected decline announced, causing mining giants Rio Tinto (ASX: RIO) and BHP Billiton (ASX: BHP) to both finish the week in the red.

But it was the stocks that investors have flocked to over the last year that really led the market south. Woolworths (ASX: WOW) and Wesfarmers (ASX: WES) slumped 2.7% and 4.5% for the week and Telstra (ASX: TLS) dropped 4.1%. Meanwhile, each of the Big Four banks also slid, including an 8.5% fall in value for ANZ (ASX: ANZ), adding to fears that the “bubble” that has been created could be ready to burst.

Anton Tagliaferro, investment director at Investors Mutual, said “I think it just shows some of the rallies we’ve seen in the last couple of months in those yields stocks and sectors was really just hot money going into a momentum trade and it’s just used the excuse of Bernanke’s comments, the Chinese PMI and Japanese bond yields to correct an overbought position.” Tagliaferro also added, however, that he expected the markets to correct themselves in coming weeks, as investors grew attracted to the ‘discounted’ blue-chips on offer.

Foolish takeaway

The old “sell in May and go away” strategy seems to have kicked in again this year, as the market’s rally has largely tapered off and investors begin to grow edgy. However, last week’s market decline has offered investors some very attractive opportunities. There are many quality companies to be found at discounted prices, such as Codan Limited (ASX: CDA) and Corporate Travel Management (ASX: CTD) that have demolished the market in the last 12 months. The market’s woes should be embraced by the investor, as it is in the down period that there is real money to be made.

As mentioned previously, a number of blue-chips have also become cheaper due to the market’s hesitance. If you’re in the market for high yielding ASX shares, then get “3 Stocks for the Great Dividend Boom” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

Motley Fool contributor Ryan Newman owns share in Codan Limited.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »