The ASX200 sprang back to life yesterday with the Banks and heavyweight iron ore names combining to send the index up 0.8%, finally closing right back in the middle of the last 5-weeks trading range. Complacency can be the enemy of a successful investor and it’s our opinion that after consolidating for a very similar 3-month period to this time last year the likelihood of a breakout has increased dramatically i.e. don’t assume that the current market slumber will continue:
- No change, MM is technically bullish on a close above 7480 and bearish below 7300, ultimately the market will tell us where it wants to head next, however bullish the seasonal factors may be.
Global bond markets continue to dominate equities, not so much from an index perspective but certainly with regard to sentiment on the sector level, one of my colleagues summed it up perfectly yesterday, and I paraphrase, when he said “I cannot remember a market like today that’s passing the ball back and forth between value & growth almost daily”:
Value Sector: when we see markets embrace an optimistic outlook towards global economic growth moving forward the Resources & Banking Sectors perform strongly.
Growth Sector: conversely when we see surprises on the upside by bond yields the “wobbles” set into the likes of tech and healthcare Sectors i.e. the last 48-hours.
Hence when we saw US 2-year bond yields post a new 20-month high after Joe Biden nominated Jerome Powell for a 2nd term we saw weakness by the tech names both in the US and locally while the banks and resources were strong. The important word to note here is when the markets are “surprised”, the NASDAQ has boomed since the outbreak of COVID including the rally in yields over the last 6-months but their sentiment / performance has proven vulnerable when things move too far too fast, just as they’re experiencing currently.
MM has one important take out from this:
- MM is bullish bond yields / reflation into 2022 hence the occasional warning that growth stocks have provided in 2021 could easily escalate moving forward.
Overnight US stocks were mixed with tech stocks falling almost 0.5% while the Dow rallied around 200-points aided by the Energy and Financial Sectors, the SPI futures are calling the ASX200 to open flat early this morning although BHP is trading up another 1% in the US.
MM remains bullish the ASX targeting fresh highs in the weeks ahead
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