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The ASX200 has started July in subdued fashion, remaining unchanged after its first two trading sessions. As would be expected after a quiet start to the week and month, news was thin on the ground, but we did see some action starting to unfold on the stock level. This is precisely where MM believes investors need to focus through the remainder of 2025 to add performance (alpha) to portfolios. After a fascinating FY25, which saw valuations in some pockets stretch far higher than many thought possible, we must keep focussed on portfolio positioning for what potentially comes next and not be anchored to what has just been.
For example, Commonwealth Bank (CBA) is getting as much airtime for its performance over the last year as Nvidia (NVDA US) did through 2024. CBA’s almighty surge towards $200 has taken its index weight to around 12%, and its share price is well beyond the point where it makes sense on traditional/historical fundamentals. How to approach the stock remains the most significant dichotomy for local fund managers, with a recent fund manager survey by JP Morgan showing only 50% have CBA as their top holding. Yet, the stock is now over 60% larger than its closest rival by market cap, diversified miner BHP. We discuss CBA further in the Income Portfolio section of todays note.
- Over the coming months, our focus will remain on the stock level, but we reiterate that MM doesn’t expect the “Certainty Trade” elastic band to snap, we just envisage some adjustment.
Overseas markets were mixed on Tuesday night, European bourses saw the German DAX drop 1% whereas the UK FTSE advanced 0.4%. In the US, the tech-based NASDAQ retreated 0.9% while the Dow and small-cap Russell 2000 indices gained 0.9%. The overnight rotation out of the prominent tech names was only one session, but it illustrates the sort of action under the hood we anticipated in the second half of 2025.
- The ASX200 is set to open up 0.2% this morning, with the resources sector likely to lead the line.
