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A good session from commodity stocks underpinned a positive day for the ASX. Iron Ore held onto recent strength, while Citi was out with a bullish note on Copper saying…we believe copper’s second secular bull market this century is taking hold, 20 years after China urbanization and industrialization-led secular bull market. They think recent strength has further to run in the short & longer term and they revised up their price assumptions across the board. A very bullish note on Copper that is aligned with MM’s view.
BHP and RIO are two stocks most closely followed by MM subscribers; just look at Saturday’s Q&A. Hence, it caught our attention when one of the leading stories in yesterday’s AFR was “Brokers go all in on RIO tipping 20% annual share price jump”, i.e., at MM, we’ve preferred BHP over RIO over recent years. They believe that RIO is better positioned for a boom in industrial metals, and they also think it has a stronger balance sheet. A glance at the two stocks shows they’ve pretty much danced in tandem since COVID, while so far in 2024, BHP is down -12.2% and RIO -10.3%, with iron ore weighing on both miners.
A positive session to kick off the new trading week and while the index was fairly subdued, a lot was happening under the hood as we edge towards US quarterly results that kick into gear on Friday.
Gold surged to new all-time highs last week, shrugging off a pullback in bonds (higher yields). The trend of precious metals is usually determined or significantly influenced by interest rates, but not at the moment—higher interest rates make zero-yielding assets such as gold less attractive from a relative perspective. There are arguably three main drivers of gold at the moment, with two very bullish and one mildly bearish short-term.
With so much conflicting data and rhetoric, it’s not surprising that volatility is increasing. MM still believes global interest rates are set to fall through 2024/5; hence, we remain optimistic about equities. However, the ongoing speculation around the timing of these said cuts looks set to keep both investors and traders on their toes. We continue to believe stocks/sectors will dance to the “three steps forward, two steps back” tune over the coming months until the future path of rate moves by the RBA, Fed, et al. becomes set in stone. As we’ve pointed out a few times recently, every month of 2024 has delivered a 210-310 pullback for the ASX200, with an average of the last three pullbacks taking the index to ~7650.
A soggy day in Sydney and the market was very similar, weakness from the get-go saw all sectors finish lower. Some pockets of strength in Gold, Energy was solid and a few Healthcare stocks held up okay, but other than that, it was a fairly bleak Friday across the board.
We are amending the Active Growth Portfolio and adding one new position to the Emerging Companies Portfolio.
These three unrelated commodities have surged higher recently, taking many ASX names along for the ride. For example, in 2024, Sandfire Resources (SFR) is up +24%, Northern Star (NST) +8%, and Paladin (PDN) +50%. Fortunately, at MM, we enjoyed the moves of all three themes, and today, we quickly reviewed the group to evaluate if our exposure needs tweaking as market volatility starts to increase.
The ASX recovered 1/3rd of yesterdays sell-off with a broad based rebound playing out – all sectors higher, led by the interest rates sensitive names that were hardest hit yesterday.
We believe the end-of-quarter squeeze into Easter amplified the sharp fall on Wednesday; hence, we looked back at the charts to see if this “Gut Feel” had any foundation. Only twice since COVID have stocks squeezed into the end of the quarter, and the last time was the previous quarter, which subsequently witnessed the ASX200 unravel 260 points in just three weeks. However, any further comparisons are akin to “curve fitting,” with such upside squeezes actually very few and far between.
