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With so much negative rhetoric doing the rounds, the market has remained incredibly resilient and today was no different. Commodities were hit overnight on growing recessionary fears, however by the close, early weakness was bought into and the ASX200 finished higher on the day with 65% of stocks closing in the green despite BHP taking ~8 index points from the broader market.
This week was the famous Sohn Investment Conference in the US, the original event that is now also run in Australia under the Hearts & Minds banner. At Market Matters, we do our best to consume as much information as possible, and distil it down into actionable insight for our members, applying our own lens. This week’s event had some interesting nuggets as always and we’ll touch on a few in today’s note, but here’s what we gleaned from a high level.
Solid earnings and a bump of corporate activity was not enough to push the market higher today, weakness amongst the mining stocks (ex-Lithium) to blame while Westpac (WBC) trading ex-dividend didn’t help. That said, another example of intra-day weakness being bought, more stocks than not actually trading higher while the index experiences a slow, shallow & begrudging pullback.
The ASX200 edged marginally lower yesterday, although it was a choppy session with an upside bias throughout the day. National Australia Bank (NAB) & Bank of QLD (BOQ) traded ex-dividend weighing on the index that saw a very muted reaction from the Federal Budget that was released on Tuesday evening, as we said yesterday morning, budgets don’t typically have a major influence on markets despite the continual probing of what stocks will or won’t benefit, a topic discussed yesterday here.
Another day of intra-session buying on the ASX which battled back from early session lows to close marginally down. The headline index move was largely a result of ex-dividends from NAB and BOQ, NAB’s dividend alone is worth ~10pts to the index. There was a pretty muted reaction to last night’s Federal Budget with no clear winners from a sector point of view, though Healthcare was probably the main beneficiary from the markets perspective.
In April, the $250bn Future Fund said it was now backing active fund managers switching out of the passive approach they had employed for the past 6 years. The changing economic backdrop now lends itself to active management, with Chief Executive Raphael Arndt declaring that “Conditions have changed. Economies are diverging and companies can better distinguish themselves in a more challenging environment”. We certainly agree at Market Matters with our portfolios enjoying the changing dynamics that are at play as tougher macro conditions are making it easier to distinguish the haves and have-nots.
A reasonable session after a weaker open this afternoon saw the broader market grind higher throughout the day. Some interesting company news out, with CBA providing a solid quarterly to round out bank reporting while Worley (WOR) held a strategy day where they outlaid the huge opportunity in front of them with the energy transition, and importantly, focussed on how they would grow margins.
There has been phenomenal hype in recent years around Lithium and other key commodities that underpin the global move towards Electric Vehicles (EVs), and we think there is a solid foundation to this sector, however, the shorter-term movements in the Lithium price for example, where a pullback of ~70% has recently played out, highlights a theme that MM often speaks of, around crowded trades creating risk.
A bullish start to the trading week with the risk-on sectors doing best following a stellar session on Wall Street all the way back on Friday night. Lots of analysis out this morning as brokers re-cut their numbers following a flow of trading updates last week (a result of MQG conference), with a lot of news flow stemming from some of the more interesting sectors – namely Lithium & Rare-Earths – more on these sectors in the AM report.
MM is switching from WDS to WOR
