The ASX200 climbed impressively from its lunchtime low yesterday to end the session down just 0.3%, not a bad effort considering the weak leads from the US and Europe. Over 70% of the market closed in the red but the losses were concentrated in the less influential tech stocks enabling the major index to remain resilient as the “buy the dip” mentality remerged – one day doesn’t make a summer but MM believes the markets looking good for an October rally.
The last decent “taper tantrum” was back in 2018 when growth stocks endured a painful albeit fairly short / sharp correction. MM is not too heavily exposed to tech but it was still painful yesterday as our growth portfolio saw Bravura (BVS) -2.3%, Xero (XRO) -2.1%, Altium (ALU) -3.6%, Zip (Z1P) -4.8% and HUB24 (HUB) -4.4% all sitting firmly in the losers corner.
NB A “taper tantrum” is when equities and in particular high valuation growth names fall in anticipation of rising bond yields.
The RBA spoke yesterday but it had very little impact on the market with their action & statement containing few surprises:
- The cash rate was maintained at 0.1%, next month will herald the 1-year anniversary at this historic level with the RBA still not forecasting any hike until 2024, a view not embraced by all economists.
- Dr Philip Lowe reiterated that both the critical influences of inflation and wages remain subdued and hence are not putting any pressure on their outlook at this point in time.
- However we did hear the rumblings around introducing tighter lending controls to reign in the booming Australian property market which nationally has rallied over 20% in just 12-months.
Last time we saw regulators make it harder to buy property Sydney witnessed a 10% dip in prices over 12-months, in the process making 2018 the sharpest downturn in 20-years. The “powers that be” appear keen to stop property prices rising as opposed to making them fall but its one heck of a tough juggling act. Over the same period the ASX200 fell almost 7% before dividends which shouldn’t be ignored especially as MM believes the next few years will be tougher than the last for investors as the bull market matures and bond yields rise.
Overnight US stocks recovered strongly led by the unusual combination of Tech & Financials, the SPI is calling the ASX200 to open up around 40-points this morning wiping out yesterday’s losses in the process.
MM remains bullish the ASX targeting fresh highs in the weeks / months ahead
Add To Hit List
