Morning Report Monday 7th March 2016
Healthcare stocks showing signs of underperformance, is it a trend change?
Good morning everyone and I hope you all had a great weekend! Overview Last week the ASX200 rallied 4.3% led by surging bank and resource stocks; however, the healthcare sector struggled to grind out small gains with some stocks in the sector falling. This price action is what Market Matters would expect if our short term positive view for equities, followed by a significant correction, is to unfold. We are currently witnessing an aggressive rally in the underperforming stocks as opposed to strong buying in the quality names. The (recent) buying is likely to be a combination of short covering by traders and underweight fund managers chasing a few "battered" stocks that can be perceived to be cheap. Market Matters forecast at that the start of 2016 was that we would experience a year of significant changing trends: 1. The end to the bull market in US equities that has been in place since the depths of the GFC with a likely +20% correction unfolding into 2017 - see chart below.
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