Whilst many of the developed-worlds stock markets have made new all-time highs this year including in the UK and USA, the Australian stock market has failed to do so. Previous records for many of these stock markets date back to 2007, just before the financial crisis, with markets slowly recovering ever since and now eventually making new highs again 9 years later.
It may seem strange that Australia’s stock market has failed to make a new high yet considering its economy has grown faster than many of its developed-world peers and uniquely avoided recession during the financial crisis. This shows that a country’s economy isn’t necessarily the most important driver of its stock market performance as many would think. In fact, it’s supply and demand that dictate the price of any market and many of Australia’s investors have been choosing to invest their funds abroad into leading stock exchanges like in the US – the difference in performance between Australian and US stock markets can be clearly seen on charts from a CFD trading app or website. Because of this, some Australian companies have chosen to be listed on US stock exchanges like the NASDAQ or NYSE to make themselves more appealing to large funds and institutional investors.
Current outlook on Australia’s leading index
That being said, Australia’s leading stock index, the ASX 200, has been in a long-term uptrend since March 2009 and is currently in somewhat of a bullish position. The ASX 200 price chart is currently in the formation of a cup-and-handle pattern, and if it can break out of this to the upside then an obvious target would be the previous all-time highs of 2007.
This could provide good opportunities for speculators looking to invest in the index itself or its constituent stocks. It’s worth watching the chart of this index for a breakout of its cup-and-handle pattern.
If we continue to see strength in the world’s leading stock exchanges like in the USA then this will only help Australia’s stock market. Rotation of funds also occurs between different stock exchanges leading to out-performance in some and under-performance in others. If the ASX 200 can break out of its current chart pattern and start making its way towards new all-time highs then this will certainly gain the attention of many investors. A new all-time high would attract media attention, enticing more investors, and with no overhead resistance for the price to overcome this could lead to out-performance.
When could new highs happen?
Looking at the chart, it is possible Australia’s ASX 200 index could reach all-time highs before 2020. This would be dependant on the continued strong performance of global stock markets, the US stock exchanges in particular. Certain global events could have a negative effect, like an escalation of the ongoing situation with North Korea. It’s also important to remember that the news is not everything, and it’s much better to pay attention to price trends. Negative news on the Australian economy may not necessarily affect the ASX 200 in a serious way, particularly if global markets continue to be strong.