We kick this article off with a question.
When was the last time you added to your shareholdings? And I don't mean through your superannuation account. I mean buying ASX shares or international shares with your cash holdings.
If you're like many Australian investors, your answer may well be sometime in June.
You see, that's when the huge relief rally in ASX share prices that followed on the COVID-19-driven market rout petered out. On 10 June, to be precise, the All Ordinaries Index (ASX: XAO) closed at 6,269 points. That represented a phenomenal gain of 37.5% from its post-crash level on 23 February.
Since then it's been trading in a much tighter range, gaining a few percent some weeks and giving it back on others. At time of writing, the All Ords is up again for the day, but still down 0.3% from 10 June.
That's okay though. As you'll read often here at The Motley Fool, we encourage you not to get overly caught up in the shorter-term price moves. And yes, even monthly price moves are fairly short-term if you're a buy-and-hold investor with a 3 to 5-year (or longer) investment horizon.
But many investors have a hard time seeing it that way. They look at today's share prices and realise they're not the bargain they were in March and April. And the financial news headlines once trumpeting the remarkable run higher for ASX share prices have shifted focus to rising unemployment figures and potential increases in bankruptcies.
All that fuels uncertainty and fear. And while that's understandable, I believe what most investors should fear the most is missing out on the big share price gains that can still be made in the markets.
2 ASX 200 blue chips that have smashed the market
The S&P/ASX 200 Index (ASX: XJO) — comprised of the 200 largest companies on the ASX — closed down 0.7%. yesterday.
But, of course, that doesn't mean every stock closed down. Far from it.
Take Treasury Wine Estates Ltd (ASX: TWE), for example. The global winemaking and distribution company released its results for the 2020 financial year yesterday.
It reported a 6% decline in net sales revenue, largely due to a slowdown in its US market and broader negative impacts from COVID-19. But investors had largely already priced that news in. What came as a welcome surprise was the strong growth in its China business in June.
The Treasury Wine share price closed the day up 12.3%, giving it a market cap of $9.2 billion.
Financial services company AMP Limited (ASX: AMP) also had a cracker of a day on Thursday. The AMP share price closed up 10.9%. That came despite the company announcing a massive 42% drop in profits in its half year results.
Again, the market had already largely priced in the impact of COVID-19 on the wealth manager's earnings. Instead, investors look to have focused on AMP's announcement that it held $1.4 billion in surplus capital above target requirements. And that it would issue a fully franked special dividend.
Why the share market looks poised for more big gains
Now these are just 2 ASX shares. And admittedly these are one day share price moves. Though I believe the Treasury Wine share price could enjoy a long-term run, particularly if it's successful in tapping the massive growth opportunity represented by the increasing number of Chinese wine drinkers.
But there are many other companies out there with the potential for strong share price gains over the mid to long-term.
Yes, we're still faced with the blustery headwinds of the coronavirus pandemic and festering global trade disputes. But unprecedented levels of government stimulus, record low interest rates, and significant institutional and retail investor cash holdings should continue to support share prices. And eventually see them fly higher.
Now there are fears that the government debt pile is becoming unsustainable. But today Reserve Bank of Australia governor Philip Lowe moved to assuage those fears, stating:
The expected increase in public debt is entirely manageable and is affordable. It is the right thing to do to borrow today to help people, keep them in jobs and boost public investment at a time when private investment is very weak. There will always be debates about the precise nature of programs and about how much support should be provided, but the general strategy that we have is the right one.
There is also a lot of cash still waiting on the sidelines. Including an extra $10 billion in cash held by the Future Fund since 30 March. As the Australian Financial Review notes:
At June 30, the Future Fund held about $24 billion in cash, up from $15.5 billion at March 30. This means cash holdings have moved to about 15 per cent of the portfolio. A full disclosure of the fund's 2020 financial year performance and asset allocation will be released in September.
Many Australians have also used their early access to superannuation under the government's COVID-19 response to bolster their savings.
According to the latest Treasury estimates, by 31 December some $42 billion will have been withdrawn from super accounts. A lot of that is being used to pay daily bills. But according to Treasurer Josh Frydenberg, 36% of Aussies are using the money to add to their savings.
With interest rates remaining near zero, retail and institutional investors are going to be looking for a way to grow their cash. And if much of it flows into the ASX, as I believe it will, it should see some big share price gains for well-managed Aussie companies.
