The ASX200 enjoyed a sharp turnaround yesterday as the news crossed our screens in late morning that Joe Biden and Vladimir Putin had agreed to hold talks over the Ukraine / Russia situation – the can gets kicked down the road and war is averted at least for now. We cannot imagine Russia will mount an assault into Eastern Europe after so much stoushing between the respective parties, it would hardly be a surprise attack although it doesn’t feel like anyone will actually stop them. After months of brinkmanship on Ukraine’s border it’s still not exactly clear what Putin wants but I’m sure the waters will clear over the coming weeks.
The sudden demand for risk assets from 11am yesterday was again directed towards the value sector at the expense of interest sensitive stocks such as tech and healthcare i.e. the trend of 2022 remains in play. We saw the markets current outlook against tech illustrated yesterday from the reaction to a couple of positions we hold in the MM Flagship Growth Portfolio:
A2 Milk (A2M) – the dairy stock surged over 11% following a result that was “land mine free” and showed promise moving forward with almost $700m cash on the balance sheet.
Altium (ALU) – the software business was sold down almost 6% after reporting an upgrade on revenue but contracting margins, in other words it’s getting harder to grow hence the markets continued questioning towards some of the dizzy valuations in the sector.
MM’s outlook for stocks hasn’t changed for a few weeks which is encouraging considering the volatile news shaking investors’ confidence on a day to day basis. As we’ve said previously the more time the index can hold around / above 7200 the greater our confidence becomes that we can test the markets 7600 all-time high in the coming months but uncertainty remains on the menu for now.
Overnight US equity futures reversed the gains enjoyed during our day session and followed European stocks lower as the Ukraine situation appeared to take another turn for the worst – Russian stocks fell the most since the GFC, perhaps Putin is looking for some bargains for his portfolio! US stocks will start trading tonight after Washingtons Birthday holiday which interestingly is not celebrated on his actual birthday. The SPI futures are flagging a 1% drop by the ASX200 early this morning although its could close anywhere as the sabre rattling continues.
MM remains bullish the ASX while its above 7200
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