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A quiet session as you’d expect with all the smart people taking Monday off to lock in a 4-day break ahead of ANZAC day tomorrow….The ASX opened lower and remained in a holding pattern, although there were a few moves on the stock level that caught our eye.
Equities started to consolidate recent gains last week with the ASX200 slipping -0.4% while the S&P500 advanced just +0.1% where reporting season produced plenty of volatility on the stock as opposed to the index level. Bonds have dictated sector performance through 2023 with some extra spice thrown in by the banking crisis which was primarily focused on US regional banks. It’s been a fascinating year so far which we believe will deliver plenty more stock & sector rotation.
The ASX200 slipped -0.4% last week after testing the psychological 7400 level on Monday, it was the turn of the energy & mining stocks to weigh on the local index while the banks did their best to maintain the market’s upward trajectory e.g. ANZ & NAB both rallied over 1% while Woodside (WDS), BHP Group (BHP), and RIO Tinto (RIO) all fell by more than – 3%. On the stock level, it was a week that saw some standout reversion to a number of the earlier trends through 2023 with Whitehaven Coal (WHC) surging +7.4% whereas Domain Holdings (DHG) fell -7.1%.
A mixed bag across the board today with sectors split pretty much down the middle, however, the heavy-weight sectors dragged the overall index lower. Quarterly reports from the miners dominated the news flow though it was the softness in commodity prices that mostly weighed on the sector. BOQ copped a few downgrades overnight and concerns around bad debts and competition for mortgages put pressure on the financials sector. The ASX 200 was down -31pts/-0.42% for the week.
We are trimming various holdings across the Income Portfolio to raise cash levels.
What Matters Today: Is it time for MM to consider property stocks for its Flagship Growth Portfolio?
In March the ASX200 Property Accumulation Index undeformed the ASX200 by -6.6% leading to today’s question of whether enough is enough. At this stage of the cycle, we believe real estate is all about how bad things can get i.e. if a company is trading well below the value of its asserts by definition a significant degree of bad news is already built into the stock. Analysts are understandably largely preferring companies with funding certainty that are well-positioned for a higher rate environment but there can always be opportunities when the crowd jumps from one ship to another.
Another tepid session for stocks with the ASX down early before a spirited fightback saw the market trade up for the day, before some selling took hold into the close. At this stage, the market simply feels tired after its stellar run as opposed to being bearish and swamped with high-volume selling. Today the winners actually outnumbered the losers (just), although a ~2% decline by the material sector is always going to weigh, offset by a good move higher by the banks.
MM is making multiple changes to portfolios today.
A month ago we posed the question “When should we rotate between gold, coal, and lithium – Part 2.” After watching gold slip $US40 like a proverbial knife through butter in the early hours this morning we thought this morning was an ideal time to revisit the sector especially as we hold a chunky 8% of the Flagship Growth Portfolio in Evolution (EVN) and Newcrest (NCM). Although we believe gold is likely to retrace its recent advance short term we believe second-guessing such a move could easily prove costly with regards to portfolio performance i.e. at MM we are investors, not traders.
Another fairly flat session by the ASX today, although it’s looking tired and we wouldn’t be surprised to see a near-term top evolve with the first signs of money transitioning from the edgier, high-beta areas into the more defensive plays. Still, with negative market positioning (high cash levels + high bond ownership v equities) very obvious we wouldn’t be running for the hills, meaningful tops don’t often correlate with pessimistic positioning – but a pause, consolidation, and a shallow pullback could easily play out.
