Use the big trends as your long-term friend

The Aussie market is in record high neighbourhood, after steadily rising over the past 18 months. In that time the market has only fallen twice: in September last year and in September this year. Traditionally, September is the worst month for shares, and 2021 has been no different, with the ASX falling more than 3%. While it may be a treacherous time for some, others use it as an opportunity to buy shares at cheaper prices before October, when the market has historically risen about 1% on average.

September is traditionally the worst month for shares because most dividends are paid then, and investors usually take profits after receiving their dividends. Also, it’s the end of the quarter, so we often see investors rebalance their portfolios, selling or taking profits from shares that have done well in the quarter, and buying underperforming ones from the past three months.

This is one of the reasons why tech shares, which performed strongly from July to September, have been sold off. On the flipside, investors have been buying oil shares, as the energy sector is one of the worst performers this quarter.

All in all, the Aussie sharemarket is also likely to rebound as the economy reopens and takes flight once airlines hit the tarmac. Meanwhile, the market thinking is that the most upside could come from industrials and financials.

Industrials shares, such as airlines, travel, tourism and engineering, are expected to see 15% earnings per share growthin2022.Andfinancials, including banks and insurers, arealsobeingupgraded–they’re tipped to see earnings per share growth of 7.5% in 2022.

The elephant in the room is the heavyweights – buy now or invest later? We must be mindful that markets have fallen more than expected, because the biggest miners in the world and on the ASX (iron ore shares) have taken a beating with the very ugly stick, for two main reasons:

First, the iron ore price has fallen dramatically – over 40% from its high – dragging down the biggest iron ore companies, including BHP, Rio Tinto and Fortescue Metals. This drop occurred after China announced it aimed to curb carbon emissions by cutting back on steel production and slammed the breaks on buying iron ore.

The second reason the iron ore price has fallen out of bed is that China’s biggest property developer, Evergrande, is going broke. Big spill-over reactions, therefore, dragged the overall iron ore price down as the property developer is a huge consumer of steel and by extension iron ore.

As a result, over this quarter, Fortescue Metals (ASX: FMG) has fallen over 35%. Aussie-listed Rio Tinto (RIO) and BHP (BHP) fell more than 20% each. Some see this as a buying opportunity, remembering that markets move in cycles.

At some point the iron ore price could slowly rebound. So, patient investors have already started buying the dip. If you are a patient long-term investor too, you could greatly be rewarded in the long run.

Importantly, these miners are not just onetrick ponies. The juggernauts are investing in clean energy to diversify and future-proof their businesses. Fortescue, for example, is investing and working toward generating hydrogen power, and is also making its truck fleets electric in a bid to be carbon neutral by 2030.

Meanwhile, BHP is invested in uranium, which will see increasing demand following the Australian, UK and US program to build nuclear-powered submarines in Adelaide.

Finally, there’s Rio Tinto, which is investing $US2.4 billion in creating one of the world’s biggest lithium mines to cater to the undersupplied lithium market, which is seeing skyrocketing demand, thanks to the switch to electric cars.