Aussie stock market lags its peers

Why is the Aussie economy lagging while overseas markets are booming?

a woman

Although the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has risen 8% since the beginning of the year, The Australian Financial Review has labeled its performance as “pretty ordinary” compared to international markets, such as the US S&P 500 or the Japanese Nikkei.

Overnight, the Dow Jones (Index: ^DJI) climbed to a fresh all-time high of 15,576.21 points as small caps, financials and transport stocks all continued their rally. According to Bloomberg, such a broad rally hasn’t been encountered by the US since 1990.

From the S&P 500, an alarming 460 companies have so far made calendar year gains as the confidence of investors around the world continues to be restored following reassuring comments from Ben Bernanke that quantitative easing will not be tapered off until the economy is ready for it. For the year so far, the S&P 500 is up 19%.

Meanwhile, the Nikkei has increased an incredible 41% this year and looks set to continue those gains after the conservative Liberal Democratic Party won the majority of the nation’s Upper House Election.

The local market, on the other hand, is significantly lagging behind its peers. The benchmark index closed above 5,000 points for the first time in more than two months yesterday as its surge continues to heavily rely upon the performance of the big banks and other defensive high-yielding stocks.

Collectively, the banks make up around 30% of the total index. Since the fall of the dollar, foreign investors have withdrawn their money from the banks, which has dragged the economy downwards. Meanwhile, BHP Billiton (ASX: BHP) and Rio Tinto (ASX: RIO) – which also make up an enormous portion of the index – have plunged in value significantly as global demand for commodities has fallen along with slowing Chinese growth.

In addition to this, numerous earnings downgrades have been released in recent times, with the Australian share market delivering an average of 3% earnings per share growth compared to global earnings per share growth of 5% per annum over the last three years.

Foolish takeaway

Although this news may not be good for short-term investors, there are plenty of bargains to be found on the local market if you look hard enough. For instance, you can discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

More reading

Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

Wondering where you should invest $1,000 right now?

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 over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

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

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 »