The ASX200 rebounded nicely on Thursday as many stocks & sectors continue to rotate on an almost daily basis, on this occasion Tech was the standout winner while the Energy sector took a well-earned breather, almost the exact opposite to the respective moves on Wednesday. It doesn’t feel like “fresh money” is entering or leaving the market which overall makes sense as the index hasn’t moved since mid-June, investors appear to be simply looking for better places to lodge their funds within the market on an ever shortening timeframe. However it was encouraging to see almost 75% of stocks close in positive territory for the session, perhaps the time for a break out of the current trading range is nigh.
Stocks have received a plethora of bad news over recent months and the fact that we continue to tread water supports our bullish outlook into Christmas, and 2022, if equities can ignore the below tsunami some inherent strength must remain in the market:
- The Delta Strain emerged as major adversary in Round 2 of the pandemic sending Sydney into lockdown back in early July – fingers crossed things don’t happen in 3’s!
- Iron ore has halved as the demise of China Evergrande heralds enormous contraction in apartment construction and hence demand – the likes of BHP & RIO have been hammered.
- Global bond yields have started rallying with a degree of gusto applying pressure to interest rate sensitive growth stocks.
- The $US has bounced with bond yields creating a headwind for many commodities and their related names.
- APRA have started to toughen lending requirements in an effort to slow rising Australian housing prices plus as a side note neighbour NZ have started hiking rates.
Melbourne looks set to experience a slightly longer lockdown but Sydney is ready to party with Monday the day we can go to restaurants, bars and shops while kids start to go back to school the following week – more freedoms are on the cards for December. Stocks have been pricing in this reopening for many weeks, let’s all hope and pray it’s not being too optimistic, remember the UK are still enduring almost 40,000 new cases a day as like ourselves they now focus on the vaccination numbers. My “Gut Feel” is the science will win this time but be prepared for a spike in new cases with over 10% of NSW still not having received their first shot.
Overnight US stocks rallied strongly as US politicians appeared to settle their bickering around the debt ceiling plus concerns eased towards Europe’s energy woes. The Materials / Resources stocks led the line with the Dow finally closing up 338-points, while 200-points below its high the SPI Futures are still pointing to local stocks opening up around 0.5% this morning.
MM remains bullish the ASX targeting fresh highs in the weeks / months ahead
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