There are 2 times a year when investors often consider putting a broom through our portfolios, June makes sense from a tax perspective whereas December is more psychological in nature as investors consider what stocks they do and don’t want to look at next year. As subscribers know we believe bond yields will be the key to stock and sector performance through 2022 which is no big call but we are going out on a limb with how we see yields moving through next year – see chart below:
- Initially Australian 3-year bond yields look set to take another leg higher towards 1.5%, this is likely to lead to outperformance by the likes of the Resources and Banking Sectors i.e. value names.
- If we then see our anticipated dip in yields through 2022 as economic expansion / inflation doesn’t prove as strong as many expect interest sensitive defensive names such as the Utilities, Real Estate and Healthcare names are likely to be strong.
The last week has already seen the 2nd point above unfold in a few sessions, in similar manner to cryptos investors appear to have become nervous towards risk e.g. overnight in the US we saw tech stocks slide 1.5% whereas healthcare and real estate both rallied by around 1%.
