Tuesday saw the Australian market slip -0.8% on broad selling with 70% of the index closing in negative territory but come 4pm we remained around 7400, just as we did when MM delivered its previous Portfolio Positioning Report back on the 22nd December. After the NASDAQ’s excellent recovery on Monday night we thought the Australian Tech Sector would have regained some of their recent losses but it still struggled with most stocks reversing lower after a promising open, it feels like local investors will take more convincing to overcome inflation and interest rate concerns.
Interestingly heavyweight investment banks like Goldman Sachs, JP Morgan and UBS are still advocating “buy the dip” in stocks which certainly felt evident late in Mondays session for the US tech sector, its 9.5% pullback from November 2021 highs looks to have set off some buy alerts. We feel they may be correct but after a bumpy rally post the GFC the tailwinds to carry equities significantly higher look to be diminishing and MM believes more alpha / value will be added in 2022 through “selling pops” as opposed to “buying dips” with the later overdue at least one decent stumble:
- Since the COVID induced 30% plunge the US tech sector has dipped an average of 10.4% every 4 ½ months rewarding the brave buyers who stood up when things looked and felt bad.
- MM believes there will be at least one 15-20% correction in 2022 to washout these complacent short-term traders who believe “easy money” lasts forever.
- when of course is the million dollar question but the market has a habit of offering decent risk reward opportunities for patient investors, especially if it’s along the path of most pain.
Overnight saw a continuation of the US Tech recovery with the sector bouncing around 1.5% as inflation fears diminished after Fed Chair Jerome Powell reassured investors that the Fed was going to “tamp down” inflation as the economy rebounds. Overall the comments were hawkish but its nothing the market wasn’t anticipating e.g. “if we have to raise interest rates more over time we will” as he noted the US was in a strong position. The SPI futures are pointing to an open by the ASX200 up around 60-points regaining yesterday’s losses in the process.
MM remains bullish the ASX in early 2022 targeting fresh highs
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