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A solid session for the ASX today and as John Bowie Wilson (JBW) exclaimed on the desk, the market doesn’t look like it wants to go down! Resources back in favour with some good moves across the sector, particularly in the commodities we like (Copper, Uranium & Gold) which suits current portfolio positioning, while as we alluded to this morning, Tech is starting to look a bit tired.
A year ago, we went overweight the Tech Sector, which, after a few false dawns, eventually proved an excellent value add for portfolios. However, unfortunately, the local market failed to keep pace with the “Magnificent Seven”, i.e. the FANG+ Index hit fresh all-time highs overnight. In contrast, the local tech sector languishes over 35% below its 2021 high. We have now adopted a neutral stance towards US Tech. However, further upside is likely over the coming weeks; we are currently focused on levels to reduce exposure as opposed to increasing.
A quiet Monday to kick off the new trading week with the index failing to live up to the levels implied by SPI Futures on Saturday morning. A tick over 50% of the main board traded higher, however it was a session void of any real impetus in either direction – Banks up a touch, resources mixed and a bit chop-chop elsewhere!
We are making multiple changes to the Emerging Companies Portfolio.
Global equities have bounced strongly over the last few weeks, with US Big Tech leading the charge; the FANG+ Index has surged over +17% in a matter of weeks, closing on Friday within a good day of fresh all-time highs. The “Big Tech Stocks” performance year-to-date is reminiscent of bull market days. However, 2023 has only been about a handful of stocks, the “Magnificent Seven”, with 50% of the S&P500 struggling to stay in positive territory in a year where the S&P500 index is up a healthy +17.6%.
Last week was a volatile but overall positive time for the ASX200, with the local index finally closing up +1.05% after registering a fresh 7-week high on Wednesday following a market-friendly US CPI (inflation) print on Tuesday night – it hasn’t been one-way traffic, but the drop by the local 3-year yields from 4.24% to 4.1% provided a sufficient tailwind to push stocks higher. The market reacting positively to falling bond yields is nothing new, but what did catch our attention last week was some performance catch-up/reversion on the stock level as we approach 2024, perhaps a combination of bond yield optimism and book squaring:
A muted finish to the week with winners and losers split fairly evenly on the ASX200. Materials were on the winning side, supported by strength in iron ore and gold, offset by further weakness in Energy which continued to slide on higher crude inventory levels in the US. The main index finished the week up +72pts / +1.05%, a strong result particularly given the sizable ex-dividends from NAB & ANZ.
Through 2023, the six stocks in the food sector have been split into clear winners and losers, with no middle ground. What caught our eye yesterday was that the four members that rallied came from the loser’s enclosure and vice versa, i.e. some sector reversion was at play. The Food and beverage Sector has endured an awful four years, correcting ~40% as it had to contend with events such as severe weather patterns to Chinese tariffs, surging inflation plus, of course, COVID. As a sector, it looks very oversold, and a decent bounce wouldn’t surprise, but this area must be evaluated on a stock-by-stock basis.
Traders faded yesterday’s surge in equities, giving back just shy of half of the gains seen in Wednesday’s session. Energy was under pressure on reports of higher crude inventory levels in the US while strong local Employment data took the shine off Tech and Real Estate.
We are amending two MM Portfolios today
