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Healthcare stocks are in the same growth basket as tech without steroid-like volatility. Over the last 5 years apart from COVID rising bond yields has been the bane of the sector leading to sharp corrections in both 2018 and late 2021. However, we believe central banks are close to a rate pivot which should be supportive of healthcare stocks e.g. as we showed earlier the US 2-year yield has pulled back from over 5% to sub 4% in recent weeks theoretically creating a tailwind for healthcare stocks as a whole.
Another solid session for the market today with Tech & Resources doing the heavy lifting, the ASX200 is now up ~450pts/6.5% from the 20th March low hitting a 5-week high, however, we get a major test tonight with US CPI Inflation data to be released, consensus expectations are for 5.1% YoY which would be the 9th consecutive monthly decline from a 9.1% peak in June 2021.
MM is selling ALU & buying RHC
As we often state the ASX moves far more in tandem with the likes of the UK FTSE as opposed to US indices – it’s not rocket science, similar to the Australian market European indices have a larger market weighting of resource stocks as opposed to tech which now dominates most US indices. On the relative performance front, Europe is winning hands down even as war rages in Ukraine e.g. The UK FTSE is less than 2% below its pre-COVID high just above 7900 compared to the US which is -14.5% below its equivalent milestone.
A few scratching their head on the desk around what’s driving the advance, perhaps traders took risk-off ahead of the 4-day break and the rare occurrence of important U.S. economic data being released on a public holiday, or perhaps corporate activity (Newcrest getting bid again) was the catalyst, whatever the case our view has been a more bullish one suggesting that surprises are more likely on the upside – today’s result certainly fit that view nicely!
We are tweaking the Active Income Portfolio
US stocks experienced a mixed session post-Easter with the Dow closing up +0.3% while the tech-based NASDAQ slipped -0.1% but the standout of the night was the market’s strong recovery from a sharp intraday sell-off e.g. the S&P500 eked out a +0.1% gain after initially falling ~0.8% on fears of another rate hike in May. The read-through being the markets are not keen on another rate hike next month but it’s capable of taking one in its stride.
The local market tracked lower as the day rolled on as investors took some risk off the table ahead of the long weekend. Most sectors were lower, but tech felt the brunt of the pain, Resources sectors were also soft and while Financials were down, they outperformed the weaker market. Healthcare and Utilities were the main standouts. The market gave up 45pts from its highs to briefly tip below 7200 again, before recovering around half of the fall in the last 2 hours of trade. As the Aussie market enters a 4-day weekend, US Employment data will be released tomorrow night and their equity market is open on Monday.
US stocks experienced a mixed session overnight as Easter approaches with some profit taking hitting tech stocks after their strong advance through 2023 while energy and healthcare names were strong – profitless tech stocks were some of the worst on ground as traders went to cash into the break. Overall it was a “risk off” session which saw bonds rally following weaker than expected economic data – the spread between 3-month bills and 10-year Treasury notes is sitting at its highest in decades, historically a reliable sign that the US economy is headed for a slowdown &/or recession.
A nothing day for the market with stocks up early, down late, ending the session little changed. Expect no real movements either way ahead of the Easter Long Weekend where US markets are closed on Friday while in Australia, the ASX is closed both Friday & Monday, although US Non-Farm Payrolls are still being released on Friday night (+240k expected with their unemployment rate to stay steady at 3.6%).
