Why Did the Australian Share Market Rise Today?

What Happened to the ASX today?

The ASX 200 rose by more than 2% today. All sectors performed well, with the materials sector performing the best, up over 4%. The energy sector also did well, up 3.5% while financials were up nearly 2%. There was no sector in the red for the day.

Why Did This Happen to Australian stock market?

Poor employment data out yesterday and a speech from RBA Governor Glenn Stevens this morning suggest the Aussie economy is very weak and you’re going to see more interest rate cuts this year. The stock market loves cheap money and ‘discounts’ these rates cuts into prices immediately. Unfortunately, stocks are not rising because the economy is improving. In fact, it’s getting worse.

What now for the Aussie share market and interest rates?

The lower interest rates fall, the higher the Aussie stock market will rise. As long as the economy doesn’t fall into recession and impact company earnings, it looks like the market could keep heading higher for now.

But this is turning into a very speculative market and the higher it goes without an improvement in the economy, the risker things will get. Investors are buying stocks for yield because interest rates are so low. This is a rational strategy in the short term but it simply makes the Australian share market an increasingly risky place to invest.

Regards,

Greg Canavan+
for Markets and Money

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Greg Canavan is a Contributing Editor at Markets & Money and Head of Research at Port Phillip Publishing. He advocates a counter-intuitive investment philosophy based on the old adage that ‘ignorance is bliss’. Greg says that investing in the ‘Information Age’ means you now have all the information you need. But is it really useful? Much of it is noise, and serves to confuse rather than inform investors. And, through the process of confirmation bias, you tend to sift the information that you agree with. As a result, you reinforce your biases. This gives you the impression that you know what is going on. But really, you don’t know. No one does. The world is far too complex to understand. When you accept this, your newfound ignorance becomes a formidable investment weapon. That’s because you’re not a slave to your emotions and biases. Greg puts this philosophy into action as the Editor of Crisis & Opportunity. He sees opportunities in crises. To find the opportunities, he uses a process called the ‘Fusion Method’, which combines charting analysis with more conventional valuation analysis. Charting is important because it contains no opinions or emotions. Combine that with traditional stock analysis, and you have a robust stock selection strategy. With Greg’s help, you can implement a long-term wealth-building strategy into your financial planning, be better prepared for the financial challenges ahead, and stop making the same mistakes that most private investors do every time they buy a stock. To find out more about Greg’s investing style and his financial worldview, take out a free subscription to Markets & Money here. And to discover more about Greg’s ‘ignorance is bliss’ investment strategy and the Fusion Method of investing, take out a 30-day trial to his value investing service Crisis & Opportunity here. Official websites and financial e-letters Greg writes for:

 


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