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Gold stocks have disappointed investors over the last forty-eight hours, with Barrick Gold (GOLD US) and Evolution (EVN) delivering poor production numbers, pushing up unit costs, which unfortunately has been a consistent thematic over recent years. The issues with some of the heavyweight gold stocks have been painfully reflected by their share prices; even as gold tests its all-time high, both GOLD & EVN have more than halved from their post-COVID high – good job, gold hasn’t fallen! MM has been overweight gold through 2023, which has delivered a reasonable return but nothing like our positioning in uranium stocks, illustrating that picking the macro picture is just one part of the puzzle.
Gold stocks copped it on the chin following a pullback in Gold prices overnight and weaker-than-expected production numbers from sector pin-up Evolution Mining (EVN) today, continuing a soft period for the resources sector more generally. The $US rallied overnight on higher bond yields, a Fed Governor suggesting that priced rate cuts in the United States are simply too excessive, a view we concur with. Upward pressure on the greenback puts downward pressure on commodities, although this is a move we would fade rather than follow.
MM is tweaking the Active Growth Portfolio
The ASX200 fell over -1% on Tuesday, with broad-based selling washing through the market as US S&P500 Futures declined throughout our session – they seemed to get a sniff of what was to come overnight. This year’s news flow is set to be dominated by the US election, and Trump’s storming victory in Iowa cemented him as the likely candidate to poll against Biden come November – at this stage, Trump is already a solid favourite with the bookmakers to take his second term in the White House. Hence, in a similar fashion to the Christmas Rally, it’s prudent for investors to be aware of the market’s usual performance in an election year.
Markets looked tired with the ASX getting knocked on broadly lower European markets overnight (US markets closed) however US futures were also a bit soggy during our time zone. Lots of broker moves as analysts get their feet back under the desk with cuts aplenty today which hurt different pockets of the market, but overall, it looks like the market needs a breather here after a great run.
It was interesting to read in the last few days that car rental company Hertz was going to sell 30% of its US electric vehicles (EV), citing higher repair costs and diminishing demand for EVs – they are buying back the dreaded petrol vehicles! The rental giant hasn’t necessarily been a leading light over the last few years, with its shares falling in a bullish market. However, with increasing lithium supply, the commodity doesn’t want to encounter reduced demand for EVs or at least slower growth than is being priced in by markets. To put things into perspective, Hertz bought 100,000 Teslas in 2021, but the US isn’t buying into the EV story and the US accounts for well over 10% of the global car market.
Nice to get back to the desk after a break and re-engage with Market Matters members as we kick off what should be another exciting one, full of opportunities. As we suggested this morning, we will endeavour to steer you all in the right direction throughout the year! Today was a flat session at the index level, however, there were a few fire-works under the hood, the most obvious in the Uranium space after the world’s largest producer cut production forecasts highlighting just how tight the market currently is.
We are amending multiple portfolios.
The ASX200 has chopped around in early January, it’s still within striking distance of its 7632 all-time high, with the Index sitting down -1.2%, but if we included dividends, the ASX Total Return Index surged to new record highs in December. The US S&P500 is up +0.3% year-to-date, testing its all-time high with declining bond yields supporting the heavyweight Tech Sector, which has already posted fresh all-time highs even with Apple Inc (AAPL US) struggling. Bond yields continue to control markets and, most importantly, stock & sector rotation as investors second guess the future steps of major central banks.
We are making multiple changes to the Emerging Companies Portfolio
