ASX travel shares descended today on a tough day for the market.

The Flight Centre Travel Group Ltd (ASX: FLT) slid 2.74%,  Webjet Limited (ASX: WEB)  gravitated 2.86%, and Qantas Airways Limited (ASX: QAN) descended 1.96%.

Meanwhile, the Helloworld Travel Ltd (ASX: HLO) share price fell 2.40%, while Corporate Travel Management Ltd (ASX: CTD) dropped 2.54%.

Let’s take a look at why these travel companies had such a shocking day.

Travel chaos predicted

ASX travel shares followed the pattern of their US counterparts. The American Airlines Group Inc (NASDAQ: AAL) fell 2.58%, United Airlines Holdings Inc (NASDAQ: UAL) descended 3.67%, and Delta Air Lines Inc (NYSE: DAL) dropped 3.69% in Wednesday’s trade in the US. US airlines fell amid rate rise fears.

News from the White House that the USA has no plans to scrap COVID-19 testing requirements may also have weighed on travel shares. In a video shared on Twitter by The Post Millennial, Whitehouse COVID-19 advisor Jeff Zients said: “There are no plans to change the international travel requirements at this point.”

ASX travel shares Flight Centre, Webjet and Qantas all have a presence in the USA market.

Travel chaos in the lead up to Easter may also be concerning travel shareholders. Hundreds of international flights are being cancelled due to COVID-19 travel shortages, CBS News reported. Australian passengers were recently warned to arrive at the airport at least two hours early for domestic flights amid airline staff shortages, the Daily Mail reported.

Rising oil prices may also be impacting ASX travel shares. International benchmark Brent crude oil is up 1.45% to US$102.57 per barrel at the time of writing, Trading Economics data shows. Fuel is a major cost for airlines, and the oil price impacts the cost of fuel.

ASX travel share recap

In the past year, Qantas shares have fallen 7.41%, Webjet shares have fallen 2.86%, while Flight Centre shares have leapt 4.96%.

Helloworld Travel shares have soared 10.41%, while Corporate Travel shares have exploded 22.35%.

In contrast, the S&P/ASX 200 Index has returned more than 7% in the past year.

The post What went so wrong for ASX travel shares today? appeared first on The Motley Fool Australia.

More reading

• Why did the Qantas share price have such a tough time of it today?
• The Webjet share price is tumbling 5% on Thursday. Could this be why?
• The Flight Centre share price is diving 5% today. What’s next in April?
• ASX travel shares have been flying higher over the past month. Here’s why
• Why the Flight Centre share price travelled 12% higher in March

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Helloworld Limited. The Motley Fool Australia owns and has recommended Helloworld Limited. The Motley Fool Australia has recommended Corporate Travel Management Limited, Flight Centre Travel Group Limited, and Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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As Richard Carlson once said, “Reflection is one of the most underused yet powerful tools for success.” Investors spend a lot of time looking ahead, but in this article, we take a moment to reflect upon the last month in ASX All Ordinaries shares.

If you were to simplify what investors want to achieve into one short sentence, it would probably be something along the lines of — “find and invest in the big winners while avoiding the big losers”.

And so, we found the best and worst performers of the All Ordinaries in March to offer some reflection.

Lithium developer takes out the top spot among All Ordinaries

It’s hard to beat a company whose shares have skyrocketed 108% in a single month. Though it might be hard to believe, that is exactly what lithium developer Lake Resouces N.L (ASX: LKE) achieved in March.

Taking a look at what the company got up to during the month, you might begin to see what instilled such excitement among shareholders. For instance, Lake Resources found itself being added to the S&P/ASX 300 Index (ASX: XKO).

In addition, the company raised $39 million through the execution of its at-the-market subscription agreement with Acuity Capital.

Finally, on 29 March this ASX All Ordinaries share announced it had linked up with Japan-based Hanwa Co Ltd. According to the announcement, an offtake proposal of 25,000 tonnes of lithium carbonate per annum had been made. Furthermore, Hanwa suggested it was considering a meaningful equity investment in Lake Resources.

Missing the target in March

Not every ASX All Ordinaries share could be as fortunate as Lake Resources. For 88 Energy Ltd (ASX: 88E), it was a plain painful month — where did it all go wrong for the oil explorer? It’s time for some more reflection.

Unfortunately, 88 Energy released a company update on 30 March which sent shareholders running. As per the announcement, 88 Energy was unable to obtain fluid samples from its target zones in the Merlin-2 well, situated in Alaska.

The news douses investors’ hopes of striking a well rich with oil. In turn, this ASX All Ordinaries share shaved off 63% in March.

The post Guess which 2 ASX shares were the best and worst All Ordinaries performers in March appeared first on The Motley Fool Australia.

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• The ASX 200 just had its longest winning streak since 2017. What’s doing?
• 5 ASX lithium and green metals shares hitting new 52-week highs today
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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Investing in the financial markets is no doubt as much an art as it is a science, as with all skilful practices.

That’s an important distinction, because there’s a relationship between art and emotion, provides George Mather in The Psychology of Visual Art.

However, it’s also important to realise that successful investing is as systematic and science-based as it gets, especially in today’s data-driven world.

Such that computers, algorithms, machine learning, proprietary high-frequency trading bots and the likes have swarmed over financial markets in the past decade. Not to mention the rise of quantitative finance in recent years as well that’s seen some of the largest hedge funds ever roll out onto the scene.

According to Mordor Intelligence, “algorithmic trading accounts for around 60-73% of the overall US equity trading”, and “the algorithmic trading market is expected to witness a [compound annual growth rate] CAGR of 10.5%” through until 2027.

Why the shift?

Much of the overhaul in the way financial markets operate revolves around the fact that algorithmic and quantitative trading methods supposedly back-out the emotion involved with investing. Investigations by The Socio-Economic Review found that ‘algo’s’ are “allegedly more rational and efficient than human traders, and less prone to emotionally motivated decisions,” to hammer in that point.

Behavioural finance tells us that humans are notoriously bad forecasters, are bad at mental accounting, suffer from cognitive and emotional biases, and are fraught with logical errors in decision making. It’s just the way we are.

For example, most investors are deemed to be loss averse, rather than being solely risk averse. What that means is, they value a loss greater than they value a win.

Consider this – numerous studies find that “a 50% chance of losing $100 must be offset by a 50% chance of gaining $200” – in other words, the upside must be twice that of the potential loss for most people to get comfy.

If it remains a 50/50 chance, the bet is often deemed to be too risky (because many aren’t strong at mental accounting either, remember?). The potential for a win is valued lower than the potential for an equal sized loss.

Fundamentally, these form the bedrocks as to why there’s been a structural shift towards the new electronic market ‘participant’ – to mitigate the risk of human error. As Oscar Wilde Said, “I don’t want to be at the mercy of my emotions. I want to use them, to enjoy them, and to dominate them”. Presumably, most market pundits would feel the same way.

Controlling emotion is actually so important, that some say harnessing the market’s psychology is essential in understanding price action and profiting from this.

“The swings we see in investment markets are far greater than can be justified by movements in investment fundamentals alone – i.e. profits, dividends, rents, interest rates, etc,” Shane Oliver of AMP Capital told Livewire.

“In fact, investor emotion plays a huge part,” he added.

Oliver also said:

A bull market runs through optimism, excitement, thrill and ultimately euphoria by which point the asset class is over loved (and usually overvalued too) – everyone who is going to buy has – and it becomes vulnerable to bad news. This is the point of maximum risk. 

Once the cycle starts to turn down in a bear market, euphoria gives way to anxiety, denial, fear, capitulation and ultimately depression at which point the asset class is under loved (and usually undervalued) – everyone who is going to sell has – and it becomes susceptible to good (or less bad) news. This is the point of maximum opportunity. 

Dampen that emotion

“Key message: investor emotion plays a huge roll in amplifying the investment cycle,” Oliver also remarked, adding that investors should avoid assets where the crowd is “euphoric and convinced it’s a sure thing”.

What to do, Oliver says?

“[F]avour assets where the crowd is depressed and the asset is under loved”.

That, he posits, is obviously far easier than done, hence why the market has taken such a shine to systematic and data-based investing methods in the first place.

Instead, focus on the long-term – which, unsurprisingly according to this data, has shown to be “solid and relatively smooth,” Oliver says – and recognise that investment returns are a function of time as much as anything.

“Since 1900 for Australian shares roughly two years out of ten have had negative returns but there are no negative returns over rolling 20-year periods. (It’s roughly two & a half years out of 10 for US shares since 1900.),” Oliver commented.

Not to mention that, amidst several global recessions, a number of wars, housing crises, Russian debt default, the GFC, and most recently, Covid-19 (just to name a small few), the S&P/ASX 200 index (ASX: XJO) has still climbed from 1,487 in 1992 to 7,442 at the close of trade on Thursday, a 400% return.

That’s worth thinking about.

The post Investing in ASX shares? How to avoid the ’emotional rollercoaster’ appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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ASX shares are under pressure along with global equities as the bond yield curve inverted, but there’s one ASX sector that could do very well in this environment, according to a leading broker.

The yield curve inversion refers to shorter-term US government bond yields rising above longer-term yields.

Investors are fretting because history has shown that an inverted yield curve precedes an economic recession.

A downturn would usually sink ASX shares as company earnings will fall in such an environment.

Inverted yield curve is good news for these ASX shares

However, the inverted yield could trigger a bull run for gold, according to Morgan Stanley. If that’s the case, this is good news for ASX gold miners like the Newcrest Mining Ltd (ASX: NCM) share price and Evolution Mining Ltd (ASX: EVN) share price.

“The yield inversion between the two- and 10-year has often been regarded as an indicator for an oncoming recession”, said Morgan Stanley.

“Prior to 2019, the last persistent inversion occurred in 2006-07, which was followed by a multiyear bull run for gold.”

Outlook for the gold price

The gold price is stuck at around US$1,900 an ounce for several weeks and experts are divided on its next move.

The gold price outperforms when the yield curve inverts and the spot gold price is well above consensus.

But Morgan Stanley believes that there are several factors, apart from the yield curve, that could push the precious metal higher.

Earnings upgrade potential for ASX gold shares

“The current yield environment, coupled with geopolitical uncertainties, high rates of inflation and US 10-year real rates and TIPS remaining negative, offers scope for gold upside potential, especially in light of current consensus estimates for the commodity”, said the broker.

“Current spot prices are slightly above CY22 MS and consensus estimates.

“However, if gold price forecasts for CY23 were to move higher and spot prices persist, there would be substantial upside risk to earnings for gold equities.”

These developments are enough to convince Morgan Stanley to change its negative bias stance on ASX gold shares.

Best ASX gold shares to buy now

The broker noted that the share prices of all gold shares under its coverage are pricing at a commodity price under the current spot price of approximately US$1,920 an ounce.

Its top buy picks in the sector are the Newcrest share price and Northern Star Resources Ltd (ASX: NST) share price.

“NCM remains our top pick for the long term, as several projects move towards FID”, said Morgan Stanley.

“NST has the highest FCF generation of our coverage and offers the most sensitivity to upside gold prices, with lowest downside due to well-priced hedges.

“NST also has a near-term catalyst with its brownfield expansion at KCGM.”

The post Yield curve inversion is bad news for ASX shares except for this sector appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Is Newcrest Mining considered a defensive ASX share?
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• Why has the Northern Star (ASX:NST) share price gained 23% in 2 months?
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor Brendon Lau owns Newcrest Mining Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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