Australian Investment Blog

With US equities at all-time highs, what sector still concerns me in the ASX200?

Last night, the S&P500 traded at all-time highs, closing up 0.3% - the Dow remains just over 100 points below its respective high. In this fundamentally unloved bull market, investors continue to be scarred by fresh highs, however all-time highs are perfectly normal in the stock market having occurred 1,100 times since 1950 - an incredible 6.8% of days! I believe investors should be more concerned about the great bond market bubble that is slowly evolving e.g. in Japan 10-year bonds yield just 0.6% p.a. and yet inflation has recently reached 2%, plus there is the risk of default. However, as I have touched on recently, including this week’s video, I believe the rising interest rate issue has been pushed further back in time by Fed comments and weak European economic data over recent weeks - amazingly at present, poor economic numbers are good for equities.Yesterday I was speaking to a Market Matters subscriber who trades CFD’s and he was asking me about what stocks I was shorting. Obviously I cannot give any Personal Advice to members, but I thought I would cover the Iron Ore space this morning, which I still could not consider buying. Chart 1 very clearly illustrates a disconnect between the Australian major Iron Ore stocks and the underlying price of the commodity. Since April 2014 the big 3 Australian miners have rallied, under the weight of “free money” as Iron Ore has fallen over 20%. History tells us either the Iron Ore Price needs to rally, or the sector is due for a decent correction.