The week ahead is shaping up to be a bumpy ride for investors as US President Donald Trump’s fight against the coronavirus leaves markets in turmoil.
The ASX 200 stock index climbed 2.6 per cent on Monday, after suffering its worst week since April in the five trading days prior – which saw markets drop around 3 per cent.
On Friday alone, the market closed 1.45 per cent lower than it opened after Mr Trump’s surprise COVID-19 diagnosis.
Although Monday’s gains are good news for investors, CommSec market analyst Steven Daghlian said they were not enough to offset last week’s losses.
And he said the weeks ahead are likely to be volatile for shares as Mr Trump reaches the critical stages of his coronavirus treatment and the hotly-contested presidential election edges closer.
“The White House is trying to be quite upbeat about President Trump’s condition for obvious reasons, and I think in the coming days there’s still going to be a lot of uncertainty,” he told The New Daily.
“The daily updates on his condition will pretty much overshadow everything else this week even though we have the federal budget and the RBA board meeting, which could bring a rate cut.”
Although both those events will undoubtedly affect Australian shares, Mr Daghlian said the real “danger” to investors would be a deterioration in Mr Trump’s condition.
This is because a decline in Mr Trump’s health will create a lot of uncertainty for US and global politics, and investors dislike uncertainty.
Everyone’s a winner
However, markets made back some of last week’s losses on Monday, buoyed by promising news that Mr Trump’s health is improving.
Roughly 90 per cent of shares recorded gains and Mr Daghlian noted no sectors of the economy were left behind despite gold stocks initially showing some sign of weakness.
Energy stocks enjoyed the biggest gains, closing out the day 4.5 per cent higher – but Mr Daghlian noted this increase followed a 7 per cent fall in the week ending October 2.
“There are essentially no sectors that are dragging on our market,” Mr Daghlian said.
But the actual volume of trades made on Monday was relatively small, Mr Daghlian said.
CommSec’s daily report noted only 3.5 billion shares were bought and sold, with a combined value of $4.1 billion.
“When you look at this move higher, it’s not being done with a huge amount of enthusiasm or money behind it,” he said.
“It’s been pretty quiet overall despite the percentage gains.”
And “there’s a lot to focus on” in the coming week, including the federal budget, the RBA’s monthly interest rate meeting, dividend payments from several large companies (including Woolworths and CSL), and a handful of annual general meetings.
The combined influence of these factors will likely make sharemarkets quite volatile in the days ahead.