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Local equities snapped a 5-session losing streak today, rounding out a soft few days to bounce into the weekend. Supported by strength overnight, the ASX200 hit a high of 7446 early, up +100pts on the session but the move tempered into the afternoon. Still, the 74pt gain today was the best session for the index in more than a month, led by Tech and Healthcare. Utilities were the only sector to finish the session lower. The ASX200 fell -1% this week, a soft Materials sector being the main drag.
We are less than three weeks into 2024, and it’s evident that today’s market is focusing more on the micro/stock news as opposed to the macro, at least for now. The US NASDAQ registered fresh all-time highs overnight, even as Fed members attempt to rein in the market’s optimism with regard to rate cuts in 2024, i.e. a market that rallies on bad news is a strong market. At MM, we have been bullish towards tech for over twelve months, targeting the recent advance by the “magnificent seven.”
The sell-off on the ASX continued today, although the morning session saw the worst of it, with the market down ~70 points just after the open, before buying the dip played out initially, with that trend continuing as employment data came in softer than expected at 11.30 am, good for the prospect of rate cuts and therefore good for stocks, and that saw a choppy session end at the mid-point of the day’s trading range.
We are amending the Active Growth Portfolio
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.
