The ASX200 rallied 0.5% on Thursday as the Financial & IT Sectors teamed up to drag the index towards fresh 4th quarter highs, it doesn’t feel like it but we’re now only 2.7% away from new all-time highs and its slowly starting to feel like when, not if, we reach that milestone. The stock and sector rotation might be dominating the tape day to day and week to week but there’s a distinct absence of sustained selling unless a company, or sector, receives some meaningful bad news e.g. Dominos (DMP) disappointing at its AGM yesterday.
We saw inflation bite into 2 stocks yesterday with DMP and Ingham’s (ING) on the receiving end of negative external factors including increased costs for major inputs such as energy and shipping. Moving into 2022, MM will be considering the impact of higher interest rates and inflation on new and existing positions as we potentially enter a new chapter for financial markets – it’s been well over a decade since the RBA hiked interest rates. Last night we saw another excellent example of how fickle financial markets have become, the day after Westpac (WBC) became the 1st of the “Big 4” to hike fixed home loan rates overseas bond yields were smacked:
- Short dated US bond yields plunged the most in 2021 after the Bank of England didn’t raise rates surprising almost all economists by their lack of action.
We touched on a technical buy trigger for local stocks in yesterday’s report, that level is now approaching rapidly i.e. MM believes a close above 7475 by the ASX200 will be very bullish targeting fresh highs. To be precise we can see such a close triggering some aggressive performance catch up against US stocks i.e. the S&P5000 has rallied over 9% from its October low compared to the ASX which has only bounced 4% over the same period. We feel another Christmas rally is looking increasingly likely and we “couldn’t be short for quids”.
Overnight US stocks were mixed courtesy of the fall in bond yields, a strong night by tech stocks helped the broad market gain 0.4% but the banks struggled causing the Dow to fall slightly. The SPI futures are calling the ASX200 to gain 20-points early on with the tech and gold names looking likely to shine on this wet Friday in Sydney.
MM remains bullish the ASX targeting fresh highs in the weeks / months ahead
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