Is the Australian Stock Market Expected to Rise or Fall in the Coming Months?

In this week’s Australian market update, Dale discusses the outlook for the stock market and whether the All Ordinaries Index is expected to rise or fall in the coming months. He also discusses the fake news that is propagating on the internet and the financial detriment this is causing many investors.

The term “fake news” became mainstream during the 2016 US election campaign, as false or heavily biased stories were distributed on hundreds of websites and across social media. This issue has now become a global problem, as it challenges the way we share information and perceive the world around us.

Last Friday, as I was preparing to write this report, I typed into Google the search term “trending stock market news” and I was surprised to see a listing with the title “Amazon releasing a new platform”. After clicking on the link, I was taken to a news website, which led with the statement “Amazon launches their newest platform to help families become wealthier”. I started reading the article with interest until I got to the point where it stated that Amazon could transform anyone into a millionaire within 3 to 4 months. At that point, my interest changed to one of suspicion.

Rather than being a service delivered by Amazon, it was a fake news site with propaganda designed to misled investors. Late last year there was also a questionable website using the reputation of Dick Smith to entice people to trade their hard-earned money to generate huge returns. Of course, it was fake news designed to take money from hard working individuals.

So, while we are all responsible for the decisions we make, I have to question whether this type of marketing is fair. While we are all familiar with the statement buyer beware, this can present challenges if a website looks credible and uses the credibility of a company or an individual to attract people to buy goods and services.

That said, if something sounds too good to be true, it probably is. Therefore, when it comes to the stock market, my advice is to always use credible news sites and to always check who you are dealing with. If a website is asking you to invest in an investment product, do your research to confirm if they are licensed in Australia, as the regulators will have little recourse in helping you if something does turn out to be fake news.

What's next for the Australian share market in 2021?

There has certainly been some surprises in the market in recent weeks and with reporting season now under way, last week was no exception. The Australian stock market was up strongly early last week before turning bearish for the rest of the week. Two weeks ago, I thought the market would fall away but it ended up rising, while last week I thought it would rise and it ended up falling. That said, the market did travel in the direction I expected early on in both weeks, which highlights how picking very short-term market moves can sometimes be difficult even for the more experienced.

The All Ordinaries Index closed low on Friday to be down 0.44 per cent for the week. If we look at the past 16 trading days, the market is only up 0.43 per cent even though it has fallen nearly 4 per cent and risen over 6 per cent during that time. The point I am making is that right now the Australian stock market is volatile and a little unpredictable.

Given the market closed low last week, it indicates further downside, which may be the start of the fall I was expecting a few weeks ago, as the low can occur any time over the next month. If the market falls away this week, it will likely travel down to below 6,500 points.

While the market is a little unpredictable, I am confident it will settle and trade higher over the next couple of months to achieve a new all-time high. That said, it is best to play the waiting game rather than second-guess which way the market will trend.

For now, good luck and good trading.

RESOURCES & LINKS:
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