Equity Indices

The ASX200 surged +4.5% from last Mondays low as defensively positioned investors appeared to press multiple buy buttons after the US CPI print, standout gains were made by the Tech, Materials, Real Estate and Energy Sectors although with the exception of the Healthcare Sector all pockets of the market contributed to the markets best performance in 9-months. As bond yields turn lower a period of “risk on” looks likely to unfold i.e. the sectors that have outperformed as yields rose through April, May and June are likely to take a backseat while yields retreat.

• The SPI Futures are pointing to a flat opening this morning following a quiet end on Wall Street to a week that enjoyed multiple US indices breaking out to multi-month highs.
• The local index remains firmly in its 2023 trading range but the underlying fundamentals have just shifted slightly towards the bulls.

US stocks embraced last week’s US inflation data taking the high-flying FAANG+ Index to a fresh all-time high, not a time to become bearish from a statistical or historical perspective but our preferred scenario is the market does experience a correction of similar magnitude to the one in February/March as we see a classic sell the fact move but subscribers should not lose sight of the trend which is clearly up.

• We are now looking for an 8-10% pullback by US Tech in line with our recent roadmap.

US reporting season is now underway with a number of the big banks delivering strong results on Friday although the share prices weren’t exciting suggesting the equities are a little fatigued after their strong advance.

Not surprisingly European stocks joined in the “Global Party” all courtesy of one slight beat by US CPI i.e. as we said too many people were positioned the wrong way! We see no reason not to adopt a positive bias toward the EURO STOXX 50 but the risk/reward isn’t very exciting around the 4400 area.

• We believe it’s a matter of when, not if, the EURO STOXX 50 makes a fresh multi-month high.