The Reserve Bank of Australia is confident the economy will start to grow again. In their August monetary policy statement, the central bank said:
‘The Australian economy is evolving broadly as expected. The Bank’s forecasts are little changed from those published in the May Statement on Monetary Policy. The economy is expected to grow at an annual rate of around 3 per cent over the next couple of years, which is a bit higher than estimates of potential growth.’
Someone better tell stocks to start moving.
For the economy to grow at 3%, businesses need to produce more goods and services, spurred by an increase in spending. This would increase corporate profits and we would see investors start to increase their buying.
Yet so far in 2017, the top 500 Aussie stocks have gone nowhere. Take a look of the All Ordinaries below.
Source: Google Finance
Adding salt to the wound is the significant climb in US equities. The Dow Jones is up 14%, the S&P 500 is up 13%, the NASDAQ is 21% higher and the small-cap Russell 2000 is up 11%.
All four indices in the US are at fresh record highs. And most of the buying has been encouraged by Trumps corporate tax cuts. As reported by the Australian Financial Review:
‘It’s all become a bit of a broken record, but Wall Street’s love of a tax cut is really beyond doubt.
‘The Russell small cap index, for example, which has the most to gain from lower tax rates, has now closed at seven consecutive record highs.
‘Some might say that after a nine-year bull market run on Wall Street, the unemployment rate close to 4 per cent and with the Federal Reserve keen to hike interest rates it’s an unusual time for a tax cut.
‘But US investors just keep on buying.
‘Tax cut equals great for shares and earnings.’
Investment Opportunities Still To Be Had
But even though we’ve gone nowhere for the year, that doesn’t mean there weren’t opportunities to be had. Nine of the top 10 best performers on the All Ordinaries have returned 100% or more year-to-date.
Had you also invested in any stocks within the ASX 200 Industrials Index or the ASX 200 Materials Index, you would have had a 78.88% and a 72.22% chance of making money in the first nine months of 2017.
Both indices have had an overwhelming majority of holdings stocks that appreciated year-to-date, as shown below.
As you can see, you can still profit in a market trending sideways. All you have to do is come up with an investment idea, identify growing trends and only invest in what you understand.
But realistically, who has the time for both a full-time job and researching hundreds of opportunities? That’s why we’ve cut down the work significantly for you. In a new Money Morning report, we’ll show you the four best stocks on the ASX for 2017. To get a free copy, click here.
Junior Analyst, Money Morning