The ASX200 finally found its mojo on the last day of September rallying 1.88% on broad based buying which ultimately saw 86% of stocks close in positive territory, the “Big 4” banks caught my attention gaining an average of 2.4% – perhaps we have a clue as to what sector could drag the index to fresh highs, as we said yesterday moving forward the heavy liftings likely to be relatively concentrated. COVID has already become old news as far as financial markets are concerned, Thursday saw awful numbers from Victoria while QLD teeters on the edge of a precipice but stocks, bonds and the $A paid absolutely no notice, what a difference a few weeks makes!
Yesterday was actually the local markets best day this year and suddenly September is in the rear view mirror with a decline of only 2.6%, not a bad effort when we consider the absolute carnage in the iron ore space e.g. BHP Group (BHP) and Fortescue Metals (FMG) plunged 16.48% and 26.41% respectively. Looking forward MM are wearing our “bullish hats” helped by October being one of the ASX’s best month over the last decade advancing an average of 2.02% which would take us up towards 7500, just shy of where MM plans to start migrating back down the risk curve i.e. “3 steps forward 2 back” as the bull market matures like a fine bottle of red.
When we consider what’s been thrown at stocks over recent weeks we feels it’s testament to the underlying strength of the liquidity driven bull market that it can remain within 4% of its all-time high. We might be hearing talk of reduced stimulus and tightening of monetary policy from central banks but its not evident yet as they watch on nervously for the delayed impact of COVID on economic expansion plus the PBOC (Chinas central bank) is pumping an ever increasing amount of money into their economy in an effort to avoid China Evergrande’s woes flowing through the whole Chinese economy – as we’ve said previously no global central bank wants to risk any further form of economic contraction – history says it will happen but they will all fight hard to avoid it being on their watch.
Overnight US stocks reversed lower after a promising start closing down over 1%, almost 2% below where the futures were calling their market during our day session hence this morning we look poised to give back most of yesterday’s gains in washing machine style volatility. In fighting within the Biden administration was cited by most pundits as the main issue for US stocks while China has now ordered their top energy firms to secure supplies at all costs, a move which feels like panic.
MM remains bullish the ASX targeting fresh highs in the weeks / months ahead
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