The ASX200 enjoyed a strong recovery yesterday even after US stocks fell over 1%, the buying was broad based with less than 30% of stocks falling as the “risk on” button was re-engaged taking the market up 0.6% with tech stocks finally coming to the fore – time will tell but perhaps MM nailed it with Tuesdays report : “What Matters Today: Hold on tight but tech looks set for a decent bounce!“. More on some of the Australian tech stocks a little later but this note won’t be 1-way traffic even if we are correct.
Not surprisingly as the market started taking Russia’s incursion into the Ukraine in its stride we saw some weakness in the defensive & energy names but it wasn’t aggressive considering the sectors advance over recent weeks. We have no interest in attempting to 2nd guess the next move (s) of Putin, Biden et al but we do remain focused on the combination of individual stock valuations and the relative performance of individual sectors if / when the “Fear & Greed” elastic band becomes too stretched in either direction.
The local market continues to rotate around the psychological 7200 area with no obvious fresh reason why it should change although we did read one headline in the SMH that would certainly produce some meaningful rotation under the hood – “Rising cost of living, stagnant wages may delay rate rises”. Remember a standout fact we mentioned from the most recent Bank of America Fund Managers Survey – Fund managers currently have the “largest underweight tech position since Aug 2006”. In other words the market is heavily skewed towards higher inflation and hikes in interest rates sooner rather than later leaving the risks firmly in the opposite direction i.e. tech at least has a positioning reason to bounce strongly from here.
Overnight US equity futures reversed the gains during our time zone with the S&P500 finally closing down a painful 1.7%, tech tried and failed to rally with Ukraine fears remaining front and centre in investors’ minds, a sentiment highlighted by the Energy Sector being the only one to close positive overnight. The SPI futures are calling the ASX200 down around 1.3% this morning wiping off more than yesterday’s gains in the process.
MM remains bullish the ASX while its around 7200
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