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We are less than halfway into June, and Europe has already elevated volatility across equity markets following a rate cut by the ECB and looming elections in the UK and France, where, in both cases, the incumbent party is in real danger of being ousted. There is an old saying that when the Dow sneezes, the ASX catches a cold; however, in the current market environment, the ASX is far more correlated to European stocks on a day-to-day basis, although, unfortunately, we have been underperforming both regions so far this year.
Equities were put under significant pressure with the market suffering its worst day since April as political risks and higher bond yields following the strong US Jobs data last week weighed on risk assets. The Materials sector was the main culprit of the weakness, gold stocks, in particular, taking a beating on the back of the tumble seen by the precious metal on Friday night.
Equity markets hate uncertainty, which was illustrated overnight by French CAC’s initial 2.4% plunge following Macron’s surprise announcement. Our underlying concern is whether stocks can maintain their upside momentum, with political and economic uncertainty increasing almost by the week—perhaps we are set for six months of ongoing stock and sector rotation.
The ASX200 market showed impressive resilience last week, rallying over 2%, inching ever closer to a new all-time high. The 8,000 milestone is now less than 2% away, a repeat performance, and we’re there. The strength should have encouraged the bulls, especially considering the market’s ability to close on its highs for the week ahead of the US Jobs Report. However, the market continues to deliver very mixed results on the stock and sector level, with the resources likely to take their turn in the “naughty corner” at the start of next week after copper and gold tumbled on Friday night. NB: The ASX is closed Monday.
A long weekend and some important data in the US tonight could have prompted caution today, however, that wasn’t the case with the ASX rallying into the close, finishing on its highs, and booking a 2% gain for the week – not a bad effort at all!
The FANG acronym has lost its popularity through 2024 as the “Magnificent Seven” and “Super Six” are more eye-catching and useful for clicks in today’s digital world. However, this index has continued to power to fresh all-time highs along with the NASDAQ, and while under the hood, not all stocks will move as one, the upside momentum of the index remains impressive.
Broad-based buying across the ASX today with all sectors up on the session. The impressive run in financials continued – banks all well supported, while Tech followed their overseas counterparts higher. When the ASX peaked in May at 7900, Aussie 3-year bond yields were at 3.84% before running up to 4.1% as expectations changed around interest rates, prompting a ~3% correction in equities. 3’s are now at 3.91% and equities have bounced.
We are adding a new position to the Growth Portfolio & two new positions to the International Portfolio
The US Tech Sector surged to fresh all-time highs overnight, led by a 5.2% surge by Nvidia (NVDA US), the shining light. At the close, the $US3 trillion dollar AI behemoth had a larger market cap than Apple Inc (AAPL US), illustrating perfectly how things change in this rapidly evolving sector. The so-called “Magnificent Seven” should really be the “Super Six”, with Tesla (TSLA US) down 30% year-to-date, having themselves evolved and performed very differently over the last year, hence our consideration of where MM should be invested across the influential space.
A solid session for stocks that recouped yesterday’s decline, although there was significant divergence from a sector and stock perspective, with commodities on the nose while the more defensive Telcos, Healthcare & Staples attracted buying.
