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We are buying a resource stock in the Active Growth Portfolio
The ASX200 fell another -0.6% on Tuesday, with over 60% of the main board closing lower, the Energy Sector being the lone wolf that managed to close up. The Resources Sector again caught our attention after ongoing measures by Beijing to stem the rout in their equities market helped the Shanghai Composite to rally over +3% following a number of announcements, including the state funds vow to boost stock purchases – a reason to cut any China facing shorts in our opinion.
A choppy session with the ASX down ~80 points early and in quick succession too before recovering ~50% of the morning declines. Reporting starting to kick into gear while the RBA took centre stage this afternoon in a new format meeting + a press conference to boot!
On December 6th, we held a Webinar “Analysing our seven highest conviction calls”, which we believe has fared pretty well over the last two months, but in today’s market, we cannot be complacent, needing to evaluate our positions and views constantly. We strongly recommend subscribers revisit the webinar, which covered the seven stocks and explained some of the Market Matters website’s exciting functionality.
A soggy start to the week for the ASX as weakness in the resources sector weighed heavily on the broader market, although banks traded well up from their session lows and healthcare stocks showed some backbone.
Social Media giant Meta Platforms surged after their results beat analysts’ expectations, and they announced the company’s first-ever quarterly dividend plus a $US50bn share buyback program, i.e. a greater than the entire market cap of Macquarie Group (MQG). Of the “Magnificent Seven,” last week we saw Meta Platforms (META US), NVIDIA (NVDA US), Amazon.com (AMZN US), Alphabet (GOOGL US), and Microsoft (MSFT US) all make fresh all-time highs while Apple Inc (AAPL US) and Tesla (TSLA US) struggled, plus Alphabet (GOOGL US) had reversed lower come Friday, in other words, its become the “Dominant Four”, not traditional broad-based buying but its proving hard to fight the tape at this stage.
The ASX200 tested 7700 for the first time in its history last week, with the index finally ending up +1.9%, just one point shy at 7699. However, it wasn’t all one-way traffic as the index rallied over 1% on two occasions while, falling by a similar degree on Thursday as volatility lifted even as stocks continued their overall surge higher.
The ASX has now put on ~950pts/14% over the course of the last 4 months to hit a new all-time high today at 7703. This week, more benign inflation, relief on interest rates and an economy that looks and feels like it will navigate a goldilocks-style economic (soft) landing has underpinned a resurgent ASX + other global equity markets, and in the process, rewarding equity investors for staying the course & burying all the negative rhetoric that percolates through the media.
The Australian Consumer Staples sector has struggled over recent years, but as MM looks to position portfolios more defensively, it’s been on our radar of late, i.e. people have to eat. With interest rates set to fall through 2024/5, inflation under control and supply chain issues in the rearview mirror, the outlook has improved for the sector. The peak cost of living has passed, with spending growth on the horizon, helped by solid immigration, with supermarkets likely to be a key beneficiary.
Jerome Powell and the Fed put a swift end to the local equity rally that had taken the ASX200 to all-time highs yesterday, as they left rates unchanged overnight as expected, however, the press conference had a few more fireworks as the Chair poured cold water on any imminent rate cut expectations.
