Market Matters Afternoon Report Friday 26th August 2016
Good Afternoon everyone
Market Data
What Mattered Today
Some selling filtered into the market today which shouldn’t come as a surprise really given Fed Chair Janet Yellen speaks in Jackson Hole on Saturday morning our time – the potential implications we’ve written about in a number of notes this week. There’s a lot of expectation built into this speech yet the market positioning (low volatility, complacency etc ) suggests otherwise.
In all likelihood, it’ll be a fizzer (and nothing actually happens), yet if it’s not, the market is not positioned for and it and this could create some real issues – prompting a short sharp drop. The risk in our view is clearly to the downside which prompted us to sell out of one position from the portfolio today – more on that below.
Although we have this concern, we still think any weakness (if it prevails) will be short and sharp rather than long and protracted – largely a result of large cash positions still held in the US (and elsewhere). That said, asset prices went up as interest rates went down. Clearly, higher rates is an impediment to higher asset prices and ultimately we think this will be catalyst for a major market selloff in time – but not yet.
Looking at expectations for US interest rates, yesterday the chart below showed a 28% chance for a hike in Sep, a 32% chance in November and a 54% chance in Dec. Today we see those expectations have firmed somewhat.
On the market today we had a range of +/- 31 points, a high of 5544, a low of 5513 and a close of 5515, down -26 points or -0.48%. Weakness into the close was obvious…
ASX 200 Intra-Day Chart
As alluded to above, we sold Macquarie (MQG) today around $80.40 – not because we dislike the stock, or are overly concerned about the market, however, we had a good profit on the table, low cash levels in our portfolio and MQG is a high beta stock – which means it will typically move more than the market does. If we think the risk is to the downside leading into this speech it makes sense to de-risk the portfolio and increase cash to less aggressive levels….MQG closed the session at $79.75.
Vocus Communications (VOC) was weak again on news that James Spenceley – who has been the driving force behind the company since inception has sold down a fair amount of stock another 1m shares since Dec15. The announcement was out today as follows…
Is this bad news? Clearlythemkt doesn’t like it and it doesn’t read well, however, it’s not a new theme. James held a lot of stock – about 8.7m shares and is no longer CEO of the company. He’s been selling for some time – yet the value of sales has ticked up in recent times. We’re unsure what he plans to do with the remaining 3.2m shares held however we’ll endeavour to find out.
List of sales for James since 2010.
Source; Shaw and Partners
Vocus Communications (VOC) Daily Chart
Looking more broadly at the week in aggregate, Altium (ALU) topped the leader board adding +27%....APN Outdoor (APN)the weakest link
Sectors
Source; Bloomberg
ASX 200 Movers
Reporting this week
NPAT = net profit after tax (consensus numbers)
EPS = earnings per share (consensus numbers)
DPS = dividend per share (consensus numbers)
Select Economic Data – This week Stuff that really Matters in Green
What Matters Overseas
FUTURES flat…
All figures contained from sources believed to be accurate. Market Matters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy. Prices as at 26/08/2016. 5:00PM.
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