Market Matters Afternoon Report Monday 16th May 2016

Afternoon Report 16/05/2016

Market Matters Afternoon Report Monday 16th May 2016

Good Afternoon everyone

Market Data

What Mattered Today

The market was bid up this morning – and traded in a range for the rest of the day…Value was low for stocks at $3.88b so v little conviction really.

Interest rates are going lower according to the 10 year bond yield which traded at the lowest yield ever today….hitting 2.205%...which suggests the RBA is almost a certainty to cut rates again. We’re now at a 60% chance of 2 more rate cut by early 2017 while nearer term, the August 2016 meeting is certainly a live one – with an 80% chance of a cut. If they don’t cut then, they’ll do it in September with the market pricing a 92% chance…

RBA minutes will be released tomorrow and employment data on Thursday which should provide some more guidance HOWEVER it seems pretty clear, the RBA is now fixated on inflation and unless we see a BIG reversal of recent trends, we’ll get a cash rate of 1.5% before the year is out.

Expectations of rate cuts are clearly supporting the market. It’s grinding higher when it probably should be selling off. Low interest rates make cash less appealing and it creates a lower hurdle to come up with ‘reasonable valuations’ for stocks. There’s little doubt that the market is overpriced here – and that’s the reason why we’re carrying +40% in cash for the Market Matters portfolio – however with a lack of a desirable alternative, stocks are still ‘relatively appealing’.

Source; Shaw and Partners

The U.S looks weak short term, and the Oz mkt has experienced some considerable outperformance in the last five weeks as discussed in the Weekend Report. We’ve got a central bank with an easing bias, theirs has a tightening bias – and we’re seeing the obvious outcomes. Stocks love an accommodative central bank…

Looking elsewhere, Blackmores (BKL) came under some BIG pressure today – off 6.3% to $170.27 – ahead of a 4 corners program tonight on “Dangerous Vitamins”…Seems a few have seen the program jumped on the SELL side as a result. We own Bellamy’s (BAL) in the MM portfolio which does not have Vitamin exposure.

Stocks & Sectors Today

Source; Bloomberg

ASX 200 Movers

***What Matters Tonight***

European leads are MIXED with the FUTURES on the FTSE -27, DAX +84 & CAC –31
DOW FUTURES are up +16pts while the S&P 500 FUTURES are up +2

Regards,
The Market Matters Team
Level 12 28-34 O'Connell St
Sydney, NSW 2000.

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 16/05/2016. 4:30PM.

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