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There wasn’t much on offer for the ASX today, a much calmer session after the fireworks of yesterday. Shares traded in a tight ~30pts range with a strong rally through the afternoon seeing it close marginally lower.
We remain bullish equities through December with the ASX200 Accumulation index poised to make fresh all-time highs, i.e. the ASX200, including dividends. Hopes of lower interest rates are driving the recent rally through 2024. However, investors are largely ignoring the risks of an economic contraction as the hiking cycle bites consumers and borrowers – the “Goldilocks scenario” is the market’s current preferred scenario.
Stocks enjoyed the best one-day jump in over a year today as peak rates met solid but not spectacular growth numbers supporting the ‘goldilocks’ economic scenario, which is very bullish equities if it comes off. The ASX recouped all of yesterday’s losses and some as we experienced a bottom left, top right sort of day, sessions like this are what equity investing is all about!
The ASX200 reversed lower for the week on Tuesday as the Resources Sector led the declines, e.g. Pilbara (PLS) -8.5%, IGO Ltd (IGO) -6.7%, Northern Star (NST) -4%, and Sandfire Resources (SFR) -3%. However, with well over 80% of the main board closing lower, there were few bright pockets, with the exception of the Healthcare Sector, which enjoyed a defensive bid, ultimately closing up 0.03%, not conclusive but at least positive.
Futures were pricing a decline of ~40pts this morning however the market fell double that ahead of the RBA decision on interest rates – which were kept on hold as expected – before stocks had a slight whimper into the close.
Always expect the unexpected is a very useful adage for investors, and today, we have looked at 3 cases that would put a spanner in the works for the majority of investors as they sit in the contrarian corner with 2024 looming on the horizon – it’s now only 20-days until Christmas. It’s worth remember this time last year; everybody was bullish on the EV trade while gold was hardly getting a mention. Here we are with a few weeks left of 2023, and lithium has crashed ~80% while gold posted fresh all-time highs.
A very solid start to the new week, particularly for resources, IT and property stocks as they key off more market-friendly rhetoric from the US Federal Reserve before the RBA’s Michelle Bullock steps up to the plate tomorrow, with the consensus call of no change one that Market Matters agrees with.
Last week saw US bonds accelerate on the upside (yields lower), taking stocks higher for their 5th consecutive week; the S&P500 posted its highest close since March 2022. Fed Chair Jerome Powell poured fuel on the Dove’s already raging fire, saying the central bank policy is “well into restrictive territory.” The result was the 2s are now trading ~1% below the Upper Limit of the Fed Funds Target Rate as trader’s price in rate cuts by the Fed next year.
The ASX200 waved goodbye to November’s stellar +4.5% advance rolling into December on Friday, the market looks poised for a seasonal Christmas Rally, aided by a strong start on Monday. On the stock level, Friday saw some low-key reversion to the panic-like end-of-month surge higher on Thursday, considering the rally throughout November, and on Thursday, the local indexes’ Friday afternoon recovery was a testament to the market’s underlying strength.
A choppy day to kick off the first day of the month with the market soft early, the ASX200 down ~40pts at the lows only to recover most of the declines before the close – not a bad effort for a Friday and another sign that markets have a bullish tone to them after a great November. The ASX200 managed a gain of 32pts/+0.46% this week, Tech and Healthcare the standouts.
