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It wasn’t quite the running of the bulls at Pamplona, but after the selling we’ve witnessed through September and October, it was a very welcome “Relief Rally”, or perhaps more. The ASX200 ended last week up +3.4% from Monday’s intra-day low, with the index rallying around 200-points over the last 3-days with strong buying in the rate-sensitive Real Estate +6.7%, Tech +4.5%, and Healthcare +4.3% sectors, laying the foundations for a stellar week while only the Utilities and energy stocks reined in the markets gains.
Stocks were up for a 4th straight session today with the main board now ~3.5% above this week’s low, a sharp turnaround since Jerome Powell hinted that the Fed has ended the most aggressive rate hiking cycle in history, with US 10-year yields now ~40bps below recent highs.
The Real Estate Sector has endured tough times of late, the local sector is down close to 5% in 2023, while the US equivalent has plunged over -38% from its early 2022 high, less than two years ago. Post-Covid, we’ve seen some tremendous returns from battered sectors when the dial finally turned with Tech, Coal and Gold all coming to mind, we believe the Property Sector could be throwing its hat into the proverbial ring as the next candidate.
Dovish commentary out of the Fed overnight helped to support equity markets globally over the last ~12 hours, and the ASX was no exception. Interest rate-leveraged sectors of Tech and Real Estate were the most significant beneficiaries as the rally in bond yields cooled off. The US 2-year yields fell back below 5% and Australian bond yields were also lower throughout our session.
Yesterday, BHP announced they were on track to invest another $7.7bn into the second stage of its mammoth potash project based in Canada. The investment is set to double production, making its Jansen potash project one of the world’s largest mines – BHP has to adopt a “get big or get out” approach to the investments; otherwise, it simply won’t move the dial on its earnings profile, the primary reason it hasn’t ventured into lithium. The war between Russia and Ukraine has seen prices double, creating inflation across the food industry, with potash being a core fertiliser for crops such as corn and wheat.
Some reprieve from recent weakness across the ASX today with stocks holding onto morning gains to finish at session highs, up 0.85%, after a weak October saw the market down 3.8%, underperforming global peers.
MM is buying HCA US in the International Equities Portfolio
US indices rallied overnight, reducing losses for October but still registering its first 3-month losing streak since 2020, the S&P500 closed up over 0.6% near the session’s high – bond yields surging to levels not witnessed for 16-years have weighed on stocks through September/October. Real estate and financials outperformed on the sector level while it was a mixed bag under the hood of the influential tech sector, with NVIDIA (NVDA US) and Meta Platforms (META US) closing lower.
The local index saw the best of the day early on, starting off with a respectable ~0.60% rally thanks mostly to a bounce across the Big 4 banks. The strength slipped throughout the afternoon though with cracks in China’s economy leading Materials lower. The index traded down on the session late in the day but managed to close marginally higher.
The NYSE FANG+ Index has corrected over 15% since July, but it wouldn’t take much of a Christmas rally to test its all-time high, especially if Apple Inc (AAPL US) delivers a strong result on Thursday. The performance of the US big tech names has been extremely varied through 2023, from NVIDIA (NVDA US) +180% to Tesla (TSLA US) +60%, but the overriding common denominator is they’ve all enjoyed a strong year-to-date, even as bond yields have surged ever higher.
