Investors are hurting, with the Australian stock market down for the fourth consecutive day. With the S&P / ASX 200 Index (Index:^AXJO) (ASX:XJO) sliding 1.3% in trading today, almost all of the gains from 2013 have been erased.
At the start of this year, the index was trading at 4,648.9 – it’s currently at 4.674.3. From a 52 week high of 5,249.6, set in early May, the index has now slumped more than 10%. The falling Australian dollar, concerns of weak economic growth in China and the likelihood of the US tapering off its quantitative easing have all hit our market.
The Aussie dollar has dropped more than 11% since mid-April against the greenback, as the Reserve Bank of Australia cut interest rates, and the US dollar strengthened against most currencies. The US Federal Reserve announced last week that it was planning to cut back its bond buying program (quantitative easing), and could cease totally by mid-2014.
Equity markets have reacted like a drug addict about to be deprived of its favourite drug, and thrown what has been referred to as a ‘taper tantrum’. The massive stimulus by the US was seen as pushing up the share prices of US companies, but take that away suddenly and investors have lost all confidence.
In China, economic growth that was expected to be over 7% now appears to be lower, with no indications that the Chinese government will add further stimulus to maintain expected rates of growth. Add in falling commodity prices and investors appear to be selling off anything they can get their hands on.
The ASX in particular has been hard hit, with international investors selling out of our large cap stocks, especially the big banks ANZ Bank (ASX:ANZ), Commonwealth Bank (ASX:CBA), Westpac Banking Corporation (ASX:WBC) and National Australia Bank (ASX:NAB). All four have run hard this year, but with the Australian dollar falling and equity investors nervous, it seems they are taking their profits and running.
Analysts have suggested that the days of the Australian dollar keeping parity with the US dollar are over, and many expect it to slide further. As we have suggested previously, investors don’t need to panic and patience is the key during volatile times like these.
In the market for high yielding ASX shares? 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!
- Prices set to soar
- Your instant 5 share portfolio for the falling dollar
- Is BHP a buy?
- Should you buy shares today?
Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned.
These 3 stocks could be the next big movers in 2020
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.
*Returns as of 6/8/2020
- Why PWR Holdings Ltd could see its share price rise from here – July 21, 2017 12:11pm
- Fortescue Metals Group Limited share price sinks on native title decision – July 20, 2017 4:23pm
- 5 overlooked finance shares to add to your watchlist – July 20, 2017 2:33pm