Last week was the first time since May that the ASX200 failed to trade higher as the local market didn’t embrace solid gains across the US bourses. Over the 5-days it was the interest rate sensitive stock which created a headwind for the index as the Utilities, Tech, Real Estate and Healthcare Sectors all closed in red however there were no obvious correlations during the week as local bond yields also fell implying these sectors would usually outperform showing that while macro influences are important, they don’t drive equities 100% of the time.
The Sydney lockdown has given us some sign of hope in the last 24-hours with Gladys announcing only 16 new COVID cases on Sunday, well under the 7-day average which was approaching 30 cases. Hopefully the 2-week lockdown will end as planned this Friday, although the ASX has shown us that its only interested in the 2022 outlook when over 80% of Australians should be vaccinated. With the rest of the country already coming out of lockdown hopefully the stock markets lack of concern by recent events will prove well founded and the powers that be can learn from their mistakes / complacency.
Equities have largely ran their own race in 2021 with the sustained solid buying that commenced in Q4 of 2020 showing no obvious signs of relenting whatever news has been thrown into the arena. However we would like to remind subscribers that while MM is bullish risk assets moving into Christmas and beyond a rest similar to this time last year would not surprise i.e. a period of consolidation which lasted for around 5-months.
This morning the ASX is unfortunately looking poised to ignore a strong session on Wall Street probably due to weakness in the US Financial Sector and strength in the AUD, however on the bright side is the NASDAQ which again posted fresh all-time highs which should help local tech names. The RBA steps up to the plate this week with economists expecting a paring back of stimulus, no change in interest rates but a potential tweak in rhetoric the interpretation of which is likely to add spice to the local market post Tuesday.
MM remains a happy buyer of weakness over the coming weeks with an initial target for the index ~7,000
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