When inflation rises it takes interest rates along for the ride which flows down to multiple contraction / a drop in valuations i.e. people are prepared to pay less for a company’s potential growth / yield because they can suddenly get an improving return on their risk free funds at the bank i.e. a major tailwind for stocks has become a headwind
The US literally pumped money / stimulus into their economy after the GFC but the amount pales into insignificance compared to their extreme efforts post-COVID, never in history has the global economy experienced such phenomenal economic stimulus effectively providing “free money” which has fuelled massive M&A and buyback activity in equities
MM believes that company buybacks are close to a point of inflection which should remove an enormous tailwind for stock indices i.e. one of the largest net buyers of stocks may retreat
MM remains mildly bullish Australian equities looking for 4-6% further upside i.e. not a big call but we do anticipate reducing our risk if such a move unfolds
MM is looking for around 10% upside in copper in the coming months but we must remain mindful of how quickly some moves unfolded in 2020/21, in both directions!
The RBA and US midterms drove a volatile week for the ASX 200, which ultimately finished up a solid 1.3%. Not a bad result, given the uncertainty sweeping through some sectors after the ‘blue wave’ of discontent washed through the US. Except for the energy sector, most pockets of the ASX contributed to the market’s close back above the psychological 9000 level, with a 10% gain by the software names, the standout.
Aussie shares finished lower as Wall Street’s AI sell-off spilled into global markets, with miners and technology stocks bearing the brunt of fears around tighter data centre regulation and a potential slowdown in infrastructure spending.
A huge day for Aussie equities, with the ASX bouncing strongly following the US mid-term elections, a pullback in oil and lower bond yields. Technology led the charge, surging around 10%, while Materials ripped 7.5% higher - 8 of the 11 sectors finishing in the green. Energy and Financials were the notable laggards. Energy weakness was understandable as oil prices cooled, while NAB’s soft FY26 result was enough to put the kibosh on the banks, making the broader market move even more impressive.
The ASX 200 followed the US futures aggressively lower on Wednesday as it became clear that President Trump and the Republicans had lost control of both the Senate and House; the bookies got it correct.
Local shares moved lower through the day as US midterm results trickled in, with the Democrats taking control of the senate and triggering fears of tighter regulation across the AI and data centre industries, sending US futures lower and weighing on technology-linked miners.
Yesterday brought us the Melbourne Cup and another 0.25% rate hike by the RBA, taking the cash rate to 4.85%, its highest level in 18 years. The hike was totally expected, but overall the rhetoric from Michele Bullock supported our view that rates will now be on hold well into 2027, with the next move more likely to be a cut.
The ASX ultimately finished Melbourne Cup Day higher, but it was was struggling into the RBA decision, trading down around ~40 points, before rallying after the Bank delivered the widely expected 25bp hike. The split 6-3 vote, together with a more balanced message from Governor
The ASX 200 fell away on Monday ahead of the RBA and US mid-terms, with the miners and banks, the main contributors to the index's 0.6% decline. The banks slipped despite Westpac (ASX: WBC) advancing +1% following its reasonable FY26 result, despite management warning the next 12–18 months of its UNITE transformation would be challenging - UNITE is WBC’s major, multi-year technology and operational transformation program, designed to simplify how the bank operates, reduce costs and improve customer experience.
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