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The ASX surged to fresh all-time highs on Friday, taking the index up +1.3% for the week and 3.4% for the year, a solid performance considering some of the big names trading ex-dividend last week. The Financial and Real Estate Sectors led the index higher while the Energy and Materials names both slipped ~0.7%; as we’ve said a number of times in 2024, the relative performance song remains the same. On the stock level, the banks led the line with heavyweight CBA making fresh all-time highs assisted by the tailwind of the takeover bid for VUK, while real estate and gold also enjoyed strong weeks:
Another new all-time high on a very bullish Friday, the ASX 200 trading above 7800 for the first time, as the banks continue to drive gains at the index level. CY24 to date, the ASX is now up 3.4% excluding dividends as the ‘Goldilocks’ scenario for stocks seems to be playing out.
At MM, we missed the rally in discretionary retailers, but what about now? Arguably the only thing worse than missing a strong move is being sucked into a FOMO trap and buying just before it pulls back. Ironically, several analysts have fallen on the sword only to see some decent corrections unfold over recent weeks, but as we saw last night, rates are set to fall, and the Consumer Discretionary Sector is highly correlated to bonds, i.e. if the sector remained strong with high rates, it’s not surprising to see it rally higher with markets looking for the Fed to start cutting in June. Some of the takeouts across the sector from the recent reporting season provide us with some clues as to what comes next.
The highest-ever close for the ASX200 today at 7763, particularly impressive with BHP and Woodside trading ex-dividend! Strength was broad-based, more than 150 stocks in the 200 closed higher as we continue to bask in the glory of a supportive economic and monetary policy scenario, for now at least!
We are adding a new stock to the Emerging Companies Portfolio
The insurance sector discussed in an MM report last November has largely followed our expected path, albeit in a slightly more positive fashion, i.e. cautiously bullish. The performance of the major companies in the local sector has generally been strong, with three of the names up ~10% or more year-to-date. However, interest rates are only one piece of the puzzle as premiums continue to rise well ahead of inflation, e.g. in February, Suncorp (SUN) slugged consumers with a 16% price increase on car insurance in an effort to increase margins, while this week has been all about private health premiums rising by over 3%, the largest annual increase since 2019 – it’s not surprising that an increasing number of Australians are experiencing financial stress.
A solid effort from the ASX today given weakness in the US overnight (Dow -404pts) however SPI Futures had implied we’d do better, with the ASX finishing in the green and ~30pts above the early lows. The direction of least resistance is still up with the missing piece just the miners…
We are making several changes to the Active Growth Portfolio
US indices fell for a second day as profit-taking washed through the “Magnificent Seven”; the NASDAQ closed down -1.8% while the Russell 2000 (small cap) index fared better, finishing down just -1%. Apple Inc (AAPL US) tumbled 2.8% after reports that iPhone Sales had plunged 24% in China, while Tesla (TSLA US) -3.9% and Microsoft (MSFT US) -3% also struggled, both actually underperforming Apple. Outside of technology, Target Corp (TGT US) popped +12% as another retailer beat earnings estimates. Even Bitcoin experienced some profit-taking overnight after posting a fresh all-time high above $US69,000. The cryptos intraday ~10% swing demonstrated it’s not an asset class for the faint-hearted.
A choppy session for the ASX although it traded in a tight ~30pt trading range overall with Lithium stocks giving back some recent gains on two pieces of negative news, while Gold equities enjoyed the breakout in bullion prices.
