Investors who elected to wait for stocks to fall in September and October are kicking themselves now as the Australian sharemarket celebrated its sixth consecutive week of gains last week.
September and October have traditionally been the weakest months of the year for the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) and many investors would have been waiting for falls in shares before pressing the ‘buy’ button. However, the market has continued to defy those expectations, with the benchmark index having climbed to a new five-year high last week.
Stocks started off well last Monday when Larry Summers pulled out of the race to take over as the US Federal Reserve’s chairman when Ben Bernanke leaves the role next January, leaving Janet Yellen as the favourite.
As Yellen shares an almost identical view regarding quantitative easing as Bernanke (and is said to be in favour of a cautious approach to reducing the stimulus) global stockmarkets reacted positively to the news. The gains then continued to be realised following the Fed’s announcement that it would not begin tapering its stimulus program just yet.
High yielding stocks, such as the big four banks reacted very positively to the news. Although Commonwealth Bank (ASX: CBA) forfeited 0.1%, NAB (ASX: NAB), Westpac (ASX: WBC) and ANZ (ASX: ANZ) each advanced by 3.9%, 2% and 2.7%, respectively.
Meanwhile, the decision also sparked a surge in the value of gold, which finished the week at US $1,361 an ounce, compared to the US $1,326.39 the previous week. Gold miners, including Newcrest Mining (ASX: NCM) and Alacer Gold (ASX: AQG), saw very impressive gains of 9.1% and 25.2% for the week, respectively.
Indeed, there are numerous listed companies that do appear to be quite overpriced at their current values and investors would be wise to wait for a greater margin of safety before investing their hard-earned dollars, however, there are also numerous opportunities still ripe for the picking!
As has been seen over the last six weeks, investors who choose to wait for a speculated market plunge could watch the opportunities vanish before their eyes. When it comes to quality companies with plenty of opportunities ahead, investors should choose to ignore short-term market movements and instead focus on the long-term prospects.
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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.