The performance of Australia’s big four banks has caused a rally in financial stocks with the sector returning near 4 per cent during April, according to Wealth Within’s chief analyst, Dale Gillham.
Over the month to 30 April, the financials sector has returned 3.9 per cent thanks to the share price performance of Westpac, ANZ, NAB and Commonwealth Bank. The best performing of these was Westpac which has risen 5.2 per cent during April followed by Commonwealth Bank which rose 4.5 per cent. Financial AMP Capital has also been a strong driver of returns, rising more than 6% during the period.
Since the start of the year, financials have returned 10.9 per cent.
The performance is leading to a rally for the All Ordinaries index which is approaching its highest level since December 2007. The index rose 1.8 per cent during April and has risen more than 14 per cent since the start of the year.
As well as financials, the materials sector has also performed well, up 16.7 per cent since the start of 2019 although it has retreated in recent weeks, reporting losses of 1.9 per cent during April.
Gillham said: “The last time the All Ordinaries Index traded above 6,500 points was over 11 years ago on 17 December 2007, which was the start of the decline into the GFC.
“For the market to rise both the material and financial sectors need to move together which have they done in recent weeks.
“These two sectors are key to the market making strong gains this year and they will pull other sectors with them as the market mood becomes more bullish,” Gillham added.
This pull included the information technology and consumer discretionary sectors with information technology being the month’s best performing sector at 7 per cent and consumer discretionary up 5 per cent.
However, Gillham warned this bull run may come to an end soon as, while April is historically a top-performing month, June is often the worst-performing one. On average, the All Ordinaries Index loses 1.4 per cent during this month.
“Any new opportunities should be considered carefully, as the market is getting very close to heavy resistance from its previous all-time high in 2007 at 6,873 points. Therefore, while the market may rise for another two to four weeks I recommend investors exercise caution, as it is highly likely to fall into a low in late June or early July.”
