What Matters Today in Markets: Listen Here each morning
The ASX200 rallied +0.6% on the first trading day of July, under-the-hood things did not turn out as expected with the top-performing tech names being sold off even after a stellar Friday night by the heavyweight FANG+ names on Wall Street e.g. Locally we saw Wisetech (WTC) -2.9%, Technology One (TNE) -2.2%, and Xero (XRO) -0.9. The average gain of these 3 major Australian tech stocks in 2023 is +30% yet on Monday they opened on their highs following the strong session by US tech only to experience a rare day of strong selling to reverse lower. There would have been two aspects to this. Fund Managers would have been reticent to sell their top performers into June 30th so they can write about them in their FY23 portfolio reports and bang the drum on their successes, while individual holders would have preferred to delay paying capital gains tax by another year.
- We believe the markets started to see some switching out of the top performers into the unloved pockets of the market.
Later today we are going to look at some of MM’s holdings that have started to gain traction of late plus 4 that are catching our attention after prolonged periods in the “naughty corner”. If we are at the beginning of some stock/sector reversion it’s got a long way to travel considering how polarised the markets have been over the last 9 months. Plus MM is expecting a pivot in bond yields in the near future which implies that it’s an ideal period to consider some sector rotation by Active Investors.
Today’s headlines will be dictated by the RBA at 2.30 pm but we believe it’s prudent to look further ahead of whether or not Philip Lowe et al hike rates to 4.35%. In our opinion, the important factor for equities is what & where will rates peak. We believe that markets have become too hawkish on this front especially when we consider that history tells us to “buy the pause”, as opposed to waiting for the cut, today could be the 2nd pause of 2023:
- We believe short-dated bond yields are close to reversing lower which may entice some investors further up the risk curve.
This morning the SPI Futures are pointing to a flat opening following a quiet/shortened session in the US ahead of the Independence Day festivities i.e. US markets are closed tonight.
- No change, over the 2nd half of 2023 we expect most action to unfold under the hood as the market continues to 2nd guess where the central bank’s rate hiking cycle will conclude.
