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First Up

UPDATED 05/06/2025 09:35

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Wednesday saw the ASX 200 rally to within 1% of its all-time trading high on broad-based buying, with over 70% of the main board advancing, including the all-important banks and large-cap miners; the path of least resistance remains on the upside. For a rare change, the gold stocks were the weakest link as the defensives in general underperformed. Outside of the energy sector, which boomed with the uranium stocks taking heart from Meta’s commitment to Constellation Energy (CEG US), it was the consumer discretionary stocks that led the way as investors began to consider the implications of three rate cuts in the second half of 2025.

Earlier in the year, when CBA dipped below $150, we said CBA would hit $200 before $100, shame we didn’t say it would do so before Christmas! However, we have stuck to our view of new highs, likely in the 8800-9000 area before Christmas, and this is looking increasingly on point as each week passes. However, it’s time to look further ahead again as this call has become passé, and of course, it’s time we risked getting shot down in flames – again! Over the next 6-12 months, we will watch out for a couple of scenarios:

Fund managers are underweight stocks, and some retail investors are experiencing classic “Fear of Missing Out (FOMO)” – a blow-off top is on the cards for this unloved market.
It remains a market where we want to buy the dip, but we are now focusing on when the crowd decides to switch from the “Certainty Trade” – seasonally, July would be our best guess.
The remainder of 2025 and 2026 is set to be all about stock and sector rotation, with the defensives back on the menu if/when we get a blow-off move to new highs.

Overseas indices were strong overnight with European bourses testing all-time highs, the EURO STOXX 50 closed up +0.6% and the UK FTSE +0.2%. In the US, it was mixed but overall quiet session with the Dow slipping 0.2% while NASDAQ climbed +0.3% with most of the big names advancing except Tesla. Global equities hit an all-time peak for the first time since February as signs of a resilient global economy overshadowed uncertainty around trade negotiations.