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US indices experienced a mixed session overnight with the Dow falling -0.56% while the tech based NASDAQ edged +0.11% higher, weakness was fairly broad based outside of the tech and energy names. Oil prices rose as Saudi & Russia extended voluntary supply cuts bolstering the Energy Sector but creating a headwind for the broader market, Treasuries also edged higher on the inflationary read-through which didn’t help risk assets – Importantly MM believes the current advance by oil is maturing fast. The “Goldilocks” scenario is gathering momentum with Goldman Sachs cutting its recession odds to 15% while also calling the Fed to skip a rate hike this month, our first thought being equities may have already enjoyed the sugar hit, hence the question, what can push them higher into Christmas?
The ASX was down sharply early on, off ~50pts at the lows however a spirited fightback played out, pre, but more so post the RBA decision to keep rates on hold at 4.1% as widely expected, the final call for Dr Philip Lowe.
The “risk on” towards China theme was repeated across European bourses when they opened last night with mining giants Glencore Plc (GLEN LN) and Anglo American (AAL LN) trading higher from the opening bell although AAL saw its gains fade away throughout the day – MM holds Glencore in our International Equities Portfolio. Also, luxury-focused stocks that are heavily reliant on China for sales enjoyed a notable bid tone as investors/traders started to position themselves for a Beijing stimulus-led recovery. At this stage, we are getting some glimmers of hope from China’s economy but once the picture does become clear we believe the horse will have bolted in terms of increasing portfolio exposure to an economic turnaround.
The ASX opened with a bang this morning hitting a high of 7340, up 62pts before giving back 1/3rd of the gains as the day progressed. Still, with no US trade tonight and a fairly quiet day volume-wise, the direction of least resistance continues to be up led by a resurgence in the Energy and Materials sectors.
We are making changes to two portfolios today.
The US Tech Sector continues to follow the MM roadmap like a world-class rally co-driver, through July & August the FANG+ Index corrected over -13% before reversing on cue, however after just 3-weeks the picture has clearly changed with the index retracing over half of the decline and It’s now only 5.7% below July’s all-time high. The Bears might be the most vocal but they’ve been losing the arm wrestle with the more muted Bulls all year. With central banks looking more and more like they’ve reached the pinnacle of their rate hiking cycle it’s becoming increasingly easy to comprehend the rate-sensitive sector rallying to an all-time high into Christmas.
The ASX200 rallied over 200 points in the last few days of August but it was a step too far on Friday as local stocks drifted lower into the weekend, overall a good week that capped August’s decline to just -1.4 %. Obviously, September has started off on the back foot but there are still 4-weeks to go before we can pass judgement as to whether this month will live up to its seasonal poor reputation. The index finally closed up +2.3% last week as we watched the end of the reporting season unfold over the 5 days, all 11 sectors closed up with the consumer Discretionary and heavyweight Materials & Financials leading the charge. A number of underperformers over the last year figured prominently in the winner’s enclosure
US stocks delivered a mixed performance overnight with the S&P500 closing down -0.16% with the Financials -0.4% and Real Estate Sectors -0.75% offsetting gains in tech +0.37% and Consumer Discretionary +0.5%, again! The NASDAQ eked out a small gain registering its 5th consecutive positive day but it still endured its worst month in 2023 falling over -2.1%. New inflation data, core personal consumption expenditure (PCE), came in as expected allowing yields to edge lower which helped the likes of tech on the day – volatility is set to rise in the coming days with nonfarm payrolls due tonight and lower liquidity ahead of Labor Day.
Today marks the end of FY23 reporting, although there will be a few stragglers that come out late, normally with bad news! Interestingly enough, the only two sectors to finish higher during August were discretionary retail (+4.64%) and property (+0.99%), the two sectors that many fingered as having most risk ahead of results! Further still, the defensive/safe Utilities & Staples were the two weakest links, showing the importance of retaining an open mind, particularly in this market.
