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What’s the outlook as the ASX 200 enters a new bull market?

As the Australian benchmark officially crosses into fresh bull territory, we examine what some top analysts make of this recent market rebound.

The ASX 200: a ‘new and improved’ bull market

Astounding to think that on 20 February the ASX 200 traded at the 7,197 point mark.

Maybe more astounding still: over the next twenty three trading sessions the Aussie benchmark would plummet a staggering 38% – shedding close to 3,000 points in the process and hitting an intraday low of 4,402.50, on 23 March.

Yet as the coronavirus infection rate slows in a number of key countries and central banks take aggressive measures to salvage economic growth – global equity markets have rallied firmly.

Bullishness is always in vogue on Wall Street, after all.

Indeed, with the ASX 200 last closing at the 5,387 point mark (so as to imply a rally of ~22% from its March low), we’ve now technically entered a new bull market.

This stamp of optimism was seen across all of Australia’s key sectors this week: with the Financials, Health Care and Materials indexes all finishing higher.

Specifically, the Financials index (XFJ) rose ~4.7% during the shortened week; the Health Care index (XHJ) finished Thursday’s session at the 44,531 point mark; and the Materials Index (XMJ) added ~600 points from Monday to Thursday.

Misplaced or not, the market also seems to have put their faith back into some of the ASX’s most popular growth names: Afterpay (APT) rose close to 10% during the shortened week; Zip (Z1P) skyrocketed 27.43%; PointsBet (PBH) saw its stock climb 40%; and the EML Payments (EML) share price gained 14%.

Can this rally last?

Yet as equity markets surge, cracks of scepticism regarding these new and improved bull markets have emerged. Ultimately, many analysts simply think that this latest rally cannot last.

For example, Societe Generale strategist Albert Edward bluntly described this rebound as ‘nothing more than an early stage, bear market rally — before the real bear market begins.’

And in a Livewire piece published on 7 April, Jerome Lander from ProCapital said:

‘We believe markets are still overly optimistic and are failing to properly consider the ongoing challenges. As such, the current bounce may prove to simply be a bear market rally off the recent panic lows.’

‘We believe that this crisis has only just begun and investors should prepare for a long, challenging period ahead,’ Mr Lander stressed.

Finally, Goldman Sachs chief equity strategist, David Kostin, recently told CNBC that:

‘Risk to the downside is greater than the opportunity to the upside from this point where we stand today.’

As what has become a popular tactic, Mr Kostin compared what we are currently seeing unfold to the GFC, saying:

‘In 2008 in the fourth quarter there were many different rallies, I call them bear market rallies, some of which almost 20% a couple of times — but the market did not bottom until March of 2009,’ Mr Kostin finished.

How to trade markets: long or short

What are your thoughts on the market at current price levels: are you bullish or bearish? Whatever your view, you can use CFDs to trade indices, currencies and equities – both LONG or SHORT – with IG’s easy to use trading platform now.

For example, to buy (long) or sell (short) the ASX 200 using CFDs, follow these easy steps:

  • Create an IG Trading Account or log in to your existing account
  • Enter ‘ASX 200’ in the search bar and select it
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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