‘Kangaroo market’ traps Australian investors as history hints at a big change

At the beginning of 2026, I said investors should prepare for a much tougher market than we enjoyed in 2025. Rather than expecting another year of strong returns, I suggested this would likely be a year for defence rather than attack. Preserving capital, managing risk and staying patient would be just as important as finding opportunities.

So far, that’s been exactly the case.

The S&P/ASX 200 has repeatedly pushed above previous highs, only to reverse. Just when it appears to be breaking down, buyers step back in and prices recover. Higher. Lower. Higher. Lower.

It’s been a market without conviction.

For many investors, this has been far more frustrating than a traditional market decline.

Most people are familiar with two types of markets.

The first is a bull market. Optimism grows, corporate earnings improve and prices trend steadily higher. Confidence builds with every new high, encouraging more investors to enter the market. During these periods, mistakes are often forgiven because the broader trend is doing much of the heavy lifting.

Then there’s the bear market.

Fear dominates the headlines. Prices fall sharply, confidence disappears and many investors sell simply to avoid further losses. Bear markets can be painful, but they have one advantage. The direction is usually obvious.

There’s a third type of market, however, that receives far less attention.

It’s what traders often call a kangaroo market.

Unlike a bull or bear market, a kangaroo market lacks direction. Prices repeatedly jump above resistance before falling back into the trading range. They then break below support before recovering again. The market continues bouncing between buyers and sellers, frustrating almost everyone involved.

It’s a fitting name for an Australian market.

Psychologically, this is often the hardest environment to navigate.

A bear market hurts your portfolio.

A kangaroo market wears down your patience.

Every breakout looks genuine until it fails. Every decline appears to be the start of something bigger before buyers suddenly return. Investors become hesitant. Confidence slowly erodes. Eventually many stop following their strategy altogether because nothing seems to work consistently.

Markets have an interesting way of testing people.

Sometimes they capitulate investors through price. That’s the dramatic sell-off everyone remembers, where markets fall rapidly and fear takes over.

Other times they capitulate investors through time.

Instead of collapsing, they simply refuse to trend. Weeks become months. Every move is reversed. Investors grow tired, lose confidence and begin questioning their approach.

That’s exactly the environment we’ve experienced throughout much of 2026.

One of my favourite ways to explain this is through surfing.

Imagine you’re Kelly Slater, arguably the greatest surfer of all time.

Even with decades of experience, you’re still going to struggle if you’re trying to surf in whitewash. It doesn’t matter how talented you are. If the conditions aren’t there, producing great results becomes incredibly difficult.

Investing works much the same way.

Some years provide clean, powerful trends where opportunities seem obvious. Other years are messy and directionless. Success becomes less about brilliance and more about discipline, patience and risk management.

Many investors automatically assume they’re doing something wrong during these periods.

Often, they’re simply trying to surf in poor conditions.

The encouraging part is that history suggests these frustrating environments don’t last forever.

In fact, some of the strongest bull markets in history have emerged after long periods where investors became exhausted by sideways movement.

History never repeats perfectly, but it often rhymes.

Following World War I, markets spent years recovering from recession and economic uncertainty. Investors became increasingly frustrated by the lack of sustained progress. What followed was one of the greatest advances in market history, now remembered as the Roaring Twenties.

The 1970s delivered another difficult period. High inflation, oil shocks and weak economic growth created a decade of uncertainty. Markets struggled to establish lasting trends, leaving many investors questioning whether equities would ever deliver meaningful returns again.

Yet from the early 1980s onwards, one of history’s longest bull markets began. Falling inflation, improving productivity and technological innovation drove decades of wealth creation, culminating in the technology boom of the late 1990s.

More recently, investors endured two major setbacks in less than a decade. First came the bursting of the dot-com bubble, followed by the Global Financial Crisis in 2008. Confidence was shattered, and many questioned whether the golden era of investing had come to an end.

Instead, those difficult years laid the foundation for one of the strongest bull markets in modern history. From the lows following the GFC, global sharemarkets delivered well over a decade of exceptional returns.

The lesson isn’t that history repeats exactly.

It’s that long periods of frustration often become the foundation for powerful advances.

The point where investors feel the most frustrated is often much closer to the end of the difficult period than they realise.

When does the kangaroo market end?

That’s the question every investor wants answered.

The reality is that nobody knows exactly when the next sustained trend will begin. Markets don’t ring a bell to announce the start of a new bull market.

What we can do is identify the levels that matter.

For the Australian share market, the first encouraging sign would be a weekly close above 9,000 on the S&P/ASX 200.

That level has become a major area of resistance throughout 2026. Time and again, the market has rallied towards 9,000, only to attract fresh selling that pushes prices back into the range.

It’s become the ceiling of this kangaroo market.

As long as the ASX 200 remains below 9,000 on a weekly closing basis, there’s every chance this frustrating sideways environment continues.

A brief move above the level during the week isn’t enough. One of the defining characteristics of kangaroo markets is false breakouts. Prices briefly jump higher, investors become optimistic, then sellers quickly regain control and the market falls back into the range.

A convincing weekly close above 9,000 would suggest something has changed.

It would indicate buyers have finally absorbed the selling pressure that has capped the market for months. While it wouldn’t guarantee the start of a major bull market, it would be the strongest technical evidence yet that the kangaroo market may finally be ending.

Until then, patience remains one of the most valuable investing skills.

Markets move in cycles because investor psychology moves in cycles.

Periods of optimism eventually become overconfidence. Overconfidence gives way to disappointment. Disappointment becomes pessimism. Then, often when the majority have given up, the next cycle quietly begins.

You can’t have summer without winter.

Likewise, you can’t expect strong trending markets every year. Markets need time to consolidate. They need time to shake out weak hands, reset expectations and build the foundation for the next sustained advance.

That’s what 2026 has felt like.

If you’ve questioned your investing ability this year, remember that your results are always influenced by the environment you’re operating in.

Even the world’s best surfers need good waves.

Even the world’s best investors need favourable market conditions.

The Australian share market has spent much of this year testing patience rather than rewarding action. While that’s undoubtedly been frustrating, history suggests these periods often come just before some of the market’s strongest opportunities.

For now, all eyes should remain on the 9,000 level.

If the market can finally achieve a convincing weekly close above that resistance, it may well signal that the kangaroo has stopped hopping sideways and the next chapter for Australian investors has begun.

DISCLAIMER: Information and opinions provided in this column are general in nature and have been prepared for educational purposes only. Always seek personal financial advice tailored to your specific needs before making financial and investment decisions.