Freaky Friday: Why was the ASX 200 so indecisive today?

Wha went on with the share market on Friday?

Mitchell Lawler

Mitchell stumbled upon the concept of investing when in high school, devotedly urging his parents to put some money into a handful of technology companies with increasingly popular products among his demographic – many of which have gone on to great success. It wouldn’t be until 2017, some five years later, that Mitchell became an investor of his own money. Having studied and worked as a mechanical engineer in the building services industry, Mitchell takes a methodical and analytical approach to evaluating businesses. Rather than relying purely on numbers, Mitchell drills beyond a company’s metaphorical mantle to unearth obscure patterns or competitive advantages that would go otherwise unnoticed. His expertise resides within areas such as software, consumer goods, and building services equipment. However, his quest to find quality companies that set the industry standard and flex some degree of an impenetrable position has no limits – small cap to mega cap, cosmetics to healthcare – if it’s an exceptional business it’s on his radar.

Published February 4, 2022 4:47 pm AEDT

Market up or down — Image source: Getty Images

Key points

The ASX 200 Index floated between gain and loss multiple times today
Despite a reduction in volatility, investors are having a hard time deciding on whether or not now is the time to buy
Uncertainty around interest rates could be playing a role

The S&P/ASX 200 Index (ASX: XJO) had a rollercoaster of a day on Friday. Since market open this morning, the benchmark index swung between negative and positive seven times in the session.

At market close, the index tracking the top 200 listed Australian companies finished the day at 7,120.1 points, up 0.60%. An improvement from its position a week ago, when the index was tracking below 7,000 points for the first time since May 2021.

However, the wobbly behaviour of the market suggests that investors were drawn in two directions today.

Here's a look at what might have aided in the swinging of sentiment on Friday.

Contending ways of looking at the ASX 200 today

Investors showed signs of difficulty in deciding whether they want to buy or sell ASX 200 shares today. None of the 11 sectors made substantial moves in either direction.

This follows an apparent peak in the volatility index on 27 January. Since then, the velocity of moves in either direction of the ASX 200 has trended lower, as shown in the chart below. The milestone coincided with another, the index officially crossing into correction territory.

However, the ASX 200 has since been able to find its footing and avoid further losses. Meanwhile, investors have been watching two different stories being played out in the world of monetary policy.

Last week, Federal Reserve chair Jerome Powell sent shivers down the spine of market participants as he hinted at a potential rate rise as early as March. In contrast, Reserve Bank of Australia governor Philip Lowe remained relatively dovish on Tuesday.

Our own central bank maintained that it was too early to raise interest rates. Although, the next day it seemed Lowe backtracked to a degree, saying a rate rise this year was "plausible". The governor did add that while there is a chance, it remains "extremely unlikely".

The conflicting takes on inflation and the potential of rate rises possibly have investors unsure until further notice.

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