Tuesday saw the Australian market slip just -0.1% after steadily surrendering the mornings gains through the afternoon, this morning we see another example of the ASX’s uncanny knack of picking major moves on overseas bourses. Yesterday saw only the Healthcare Sector move by over 1% and it was on the downside with losses pretty evenly spread throughout most stocks. At 4pm yesterday afternoon it felt like the regularly mentioned 7400 magnet was restraining local stocks but a few hours later as the US tech futures plunged 2% and bond yields surged to fresh 2-year highs the reason lurking beneath the surface became far more apparent.
Bond yields posting a new 2-year high is a small step along MM’s forecasted path for 2022 although its one that most market followers would have been anticipating and certainly not one that will surprise many people, the next few days / weeks will be interesting especially considering our contrarian stance moving forward:
- Brent crude reached levels not seen since 2014 helping fuel the inflation fire which subsequently rallied bond yields and spooked stocks.
- The easy money may be behind us for crude oil but MM still believes an additional 10-15% upside is likely implying the advance for yields has further to unfold.
- The coming days will test the “weak longs” especially in the yield sensitive growth stocks and a short-sharp spike down to 7200 by the ASX200 wouldn’t surprise.
We still remain bullish stocks but I reiterate that MM is now far more comfortable “selling pops” as opposed to “buying dips”, a significant change from this time last year.
Overnight US stocks returned from their long weekend to ongoing interest rate concerns, the vulnerable tech based NASDAQ led the drop falling over 2.5% as only the Energy Sector managed to rally. The SPI futures are calling a tough start to the day for the ASX200 flagging a drop of around 1%.
MM remains bullish the ASX in early 2022 targeting fresh highs
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