The ASX200 ground out a small 0.1% gain on Thursday leaving us marginally higher for both the week and month, it’s becoming boring on the index level but my “Gut Feeling” is movement is looming on the horizon. The Banks continue to weigh on the index but a strong 2.4% bounce by the IT Sector managed to keep us in positive territory – its been a long while since both of the value & growth names rose or fell together as sector rotation continues to dominate proceedings. December arrives in less than week and the bullish statistics keep on rolling e.g. over the last 40-years the Australian market has rallied an average of 2.9% from mid-December into January, that would be enough to take us back to all-time highs.
Australian bond markets have fallen asleep over recent weeks even as NZ hiked rates and the US Fed said they will start hiking “sooner” if inflation continues to rise. Interestingly as MM pointed out earlier in the week St George Bank even dropped some of their fixed mortgage rates this week. We believe there are 2 parts to this equation and its likely to determine the path for equities through 2022:
- Interest rates are going up and even if the path is faster than analysts / economists expect equities are likely to remain firm just as they have done through October & November when yields soared.
- However if we see real signs that these hikes will cause economic contraction, MM would expect a rapid re-rating of stocks to the downside i.e. for now the economy’s continued strength is getting the markets vote.
One of my colleagues called 3 builders this week looking for an estimate on a job before next November, two said they were fully booked until 2023 and the 3rd hasn’t called back i.e. things clearly remain robust in many sectors of the Australian economy helped by huge COVID stimulus e.g. $130bn of JobKeeper payments in Q1 of 2020.
US stocks edged higher overnight on very low volumes as the Thanksgiving Holiday got into full swing, the SPI futures are calling the local market to open marginally higher 10am on an extremely wet day in Sydney.
MM remains bullish the ASX targeting fresh highs into Christmas
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