The ASX200 continued to follow the 2021 playbook yesterday by falling fairly hard into a 10.30 am low prior to grinding higher throughout the day, it finally closed 0.9% above the intra-day low, down just -0.1% i.e. “buy the dip” still reins supreme. Winners actually marginally trumped the losers with the banks in particular catching my eye on the upside with National Bank (NAB) popping +2.2% to make fresh post COVID highs. Septembers off and running and if the ASX200 dances to the same rhythm as it has since May we should be testing ~7700 in the coming weeks.
Dan Andrews appears to be rapidly migrating towards Glady’s way of thinking around lockdowns by recognising that eradicating the Delta Variant is nigh on impossible hence the only path to normality is through vaccination. The increasing political rhetoric towards reopening Australia during October and November is continuing to lift the travel & tourism names, hopefully from MM’s perspective Crown Resorts (CWN) will soon play some catch up on rival and previous suitor Star Entertainment (SGR) – we remain mindful that lows are often formed during a Royal Commissions when all the news appears bad.
When we combine Australia’s 2 largest states looking to reopen in the coming months with a strong GDP of +0.7% for the 2nd quarter of 2021, barring an unforeseen disaster on the virus front, we’re going avoid a “double dip recession”. Initially the economic news is reassuring but when we look through yesterdays impressive data there are some concerns slowly looming on the horizon:
- If our economy is strong enough to withstand the Delta Strain then rate hikes almost feel inevitable for 2022/23, and onwards.
- Equities are in the longest / largest bull market in history largely fuelled by liquidity & free money, this tailwind looks likely to running on borrowed time.
US stocks kicked off September in mixed fashion after data suggested their employment recovery was waning, the number led to a dip in bond yields sending investors into defensive stocks such as Apple (AAPL US) and Amazon.com (AMZN US). The SPI futures are pointing to a slight dip by the ASX200 early this morning with BHP Group (BHP) trading ex-dividend likely to provide some interesting viewing.
MM remains bullish the ASX and keen buyers of pullbacks
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