The ASX200 continues to rotate around the 7500 area, give it another 9-more days and it will perfectly mirror the 201-point pullback in June / July from both a time & price perspective. Wednesday was a quiet day even while it delivered another recovery from early weakness, we finally closed down -0.2% with less than 30% of the main board managing to close in positive territory. Interestingly Australian stocks still haven’t experienced a 5% pullback in 2021 yet Bitcoin ($US) managed to plunge -15% in just 2-hours on Tuesday illustrating perfectly the comparative risk profiles of both asset classes.
What now, reporting season is behind us and it feels like we’re in “no mans land” with a potential Christmas rally still some distance away, a few things to consider:
- Earnings season was solid with margins the big winner putting many businesses on a solid footing as we approach 2022 as a largely vaccinated country.
- With Australians sitting on ~$300bn of lockdown savings the credit cards look poised to take a hammering as we start spending, this should lead to revenue upgrades for many companies.
- Equities remain very attractive compared to the interest being earned on cash and until we see an aggressive rise in bond yields MM believes the ”buy the dip” strategy will continue to pay dividends.
- The ASX rallies ~80% of the time in December with spectacular gains often on offer for the well timed buyer, a phenomenon which could provide the icing on the 2021 cake.
We think the next few months are likely to follow the 2021 playbook with patience one of the important ingredients required to add value (alpha) into next year i.e. a few opportunities are likely to present themselves on the company level but a significant reduction in stock market exposure still makes no sense from either a fundamental or technical perspective.
US stocks drifted overnight as valuations came under the spotlight when weighed against the economic risks of COVID and reductions in central bank stimulus. A -1% fall in both Apple (AAPL US) and Facebook (FB US) helped the NASDAQ drop -0.35% with the SPI Futures calling the ASX200 to open down almost -0.5%, close to yesterday morning’s low.
MM remains bullish the ASX and keen buyers of pullbacks
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