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The ASX200 bounced over 1% on Monday, with gains by 10 out of 11 sectors and 85% of the main board, but it was the heavyweight end of town that dragged the market back towards 7650, e.g. CSL Ltd (CSL) +2.2%, BHP Group (BHP) +1.8%, and Commonwealth Bank (CBA) +0.9%. The market was up over 100 points early in the session, but another “sell recommendation” on the banks weighed on the sector and, by definition, the index, i.e. the “Big Four Banks”, plus Macquarie Group (MQG) represent 22.5% of the ASX200 by market cap. – more on this later. The ASX is not out of the woods, but it has already retraced 40% of April’s pullback in just two sessions.
- The last few weeks have seen hopes of interest rate cuts dashed, geopolitical tensions soar in the Middle East, and investors lose a degree of confidence in the “Magnificent Seven”, but the ASX200 is still only 3.3% below its all-time high.
- The path of least resistance still appears to be up for local stocks. If there’s no bad news, the market grinds higher, with different sectors doing the heavy lifting from week to week and month to month.
Our stance hasn’t changed through 2024; we are still bullish on the ASX and looking for the market to rally in a “three steps forward, two steps back” manner. If we are correct, it is time to move up the “risk curve” as the index positions itself for another attempt on the psychological 8000 area – overnight, the miner-heavy UK FTSE again tested its all-time high shrugging off the headwinds facing risk assets. A number of subscribers have mentioned their concerns around the May factor, but the statistics over the last decade suggest investors shouldn’t abandon equities:
- Over the last decade, the average return from April-July is +4.78%, but between August & September, it -3.84%, i.e. the seasonality saying should be “sell in August and buy in October” – hasn’t got the same ring to it!
Wall Street started the week on the front foot, with the S&P500 closing back above 5000 ahead of the big tech results. The NASDAQ bounced over 1% even with Tesla (TSLA US) down another -3.4%. All 11 major sectors closed higher in the session, with the financials +1.2%, the best on the day.
- The ASX200 is set to open up 0.25% this morning, with gains likely to be broad-based with BHP flat in the US.
MM remains cautiously bullish toward the ASX200 around the 7650 level
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This morning, we briefly updated our views on three resource stocks that rallied with South32 (S32), on Monday, the diversified heavyweight started the week +5.6% following a strong March quarter.
