Australian investors are experiencing a turbulent start to the year on the ASX, marked by significant market fluctuations. Industry experts caution that the concentration of investments in a limited number of stocks, combined with the commencement of Australia’s earnings season, could intensify this volatility. Commonwealth Bank (CBA), a major financial institution, saw its shares surge nearly 7 per cent following a positive earnings report. Conversely, CSL, a global biotechnology leader that develops and delivers innovative medicines, experienced an 11 per cent drop in its stock value after the unexpected departure of its chief executive and a decline in profit.
The past week has been particularly volatile, with AMP and Temple & Webster shares plummeting almost 30 per cent after their results fell short of market expectations. The S&P/ASX 200 VIX volatility index recently hit its highest level since November, driven by investor concerns about the extensive spending on artificial intelligence and subsequent tech stock sell-offs. These shifts resulted in the most significant ASX 200 swings since April. Bell Potter investment strategist Rob Crookston noted that elevated valuations and increased participation from passive, retail, and quantitative investors are exacerbating the volatility.
Despite a relatively stable macroeconomic environment, Crookston anticipates that these extreme fluctuations will persist over the next year, potentially amplified by the ongoing earnings season. Wilson Asset Management portfolio strategist Damien Boey suggests that the current volatility does not indicate a major market correction or downturn. MLC investment chief Dan Farmer has begun reducing the investment giant’s exposure to global equities, citing concerns that market confidence in certain sectors, particularly technology, is diverging from underlying fundamentals.
Perpetual’s head of investment strategy, Matt Sherwood, expressed caution regarding the Reserve Bank of Australia’s economic forecasts. He suggested actively managing investments to identify attractively priced, high-quality companies rather than passively investing in the ASX 200 index.
