Archives: Reports
The local market is still in the shadows of the major US indices when it comes to registering new all-time highs, but it has definitely been “on song” over the last few weeks; the ASX200 has already advanced +10.2% for November & December combined with a few exciting sessions remaining. However, as stocks continue to follow our roadmap into 2024, one characteristic which looks set to persist into 2024 is the strong getting stronger & weak weaker.
The bullish sentiment returned to the market today, storming higher to levels not seen for 10 months. All sectors took part in the rally with the laggard, Staples, still up by more than 0.5%, though Utilities, Tech and Consumer Discretionary were the key winners. Energy was also a standout following attacks in the Red Sea overnight, disturbing supply routes.
Monday saw cement business ABC receive a takeover bid from the largest shareholder, Victorias Barro family (~43%) and NY-listed Irish building giant CRH. The $2.1mn buyout proposal offered more hope to the long-suffering shareholders in one fell swoop than the board achieved over the last five years. The proposal at $3.20 saw the stock pop over 30%, although it still closed ~7% below the bid due to the ongoing risks associated with the approach.
Shares finally snapped a 6 session-winning streak today as the ASX took a breather from the impressive December run. Real Estate was the key laggard as exuberance over expectations of rate cuts settled. There remains some strong support for local equities, shares finished well ahead of the -1% drop implied by futures ahead of the market open this morning.
We are tweaking the Active Income Portfolio.
Equities accelerated higher last week after the US Fed left interest rates unchanged and, more importantly, they pivoted towards rate cuts in 2024—the sharp U-turn by Jerome Powell et al. changed the investment landscape moving forward from a matter of when not if the Fed would cut rates next year. The dramatic dovish change after the 3rd FOMC meeting, which left rates unchanged, saw Bank of America pencil in a 90% chance of a cut by March while the Fed members clearly expect to be active next year.
The ASX200 surged higher last week after the Fed officially pivoted on rates, giving some Christmas cheer to most share market investors around the world. The ASX200 ended the week up +3.4%, led by gains across the rate-sensitive names as bond yields dived lower, e.g. Real Estate +5.3%, Tech +4.8%, and Healthcare +4.2%. However, gains were broad-based with all 11 major sectors closing higher, with only the Utilities failing to advance more than +1.75%.
The strong momentum continued today, though this time led by the resources sectors as commodity prices found their feet. Shares finished ~0.3% off their highs with some profit taking through the afternoon but today’s rally makes it the 6th consecutive positive day for the ASX200 which is now up ~10% since the late November low of 6751. This week alone the index was up +247pts/+3.44%, higher for the third consecutive week
This week’s recent dovish tilt by the Fed has made us tweak our already bullish outlook higher; now, we wouldn’t be surprised to see the ASX200 make new all-time highs in 1Q of 2024 – Never say never! Ever since the GFC over 15 years ago, the ASX200 has been trending upwards with a few 15-20% corrections along the journey. Interest rates have been the main driver of valuations and sentiment during this time. We see no reason for this to change, i.e. stocks are in a sweet spot after the Fed’s comments on Wednesday night, but as the previous German Bund chart illustrated, we are already well into the pullback in yields MM has been flagging over the last few months.
The market opened with a bang this morning, up ~100pts and held onto the gains for the day after the US Federal Reserve left interest rates on hold and pivoted towards rate cuts in 2024 – huge news, arguably as good as it gets for equities, the perfect backdrop for a blow-off high into 2024. The rate-sensitive sectors did best, but it was a day in the sun for nearly all ASX stocks with 85% of the ASX200 finishing higher.
