Australia is exiting lockdown with a huge degree of optimism yet the retail stocks have struggled since August correcting around 15% in the process, conversely the ASX200 sits less than 3% below its all-time high. We see a few contributing factors at play:
- A classic case of “buy on rumour sell on fact” has unfolded, the majority of the so named re-opening stocks have struggled over recent weeks as profit taking and switching appears prevalent.
- Investors might also be aware of increased competition for our hard earned cash with restaurants, bars and holidays back on the menu.
- With bond yields rising some cautious investors might also be concerned that mortgage payers “spare cash” will be reduced moving forward
- Also a dip by Australian housing prices as regulators get tough with lending requirements will potentially dent consumer confidence and hence spending.
In similar fashion to the ASX we feel the pullback in the retail index is now complete but we would be fading any rally to new highs while not wading too aggressively into the current correction, at least from a sector perspective.
MM is mildly bullish the Retail Index
