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MM is buying Disney (DIS US)
Stocks snapped a 3-day losing streak today that had seen the ASX 200 pullback -371pts / 5.5%, back down testing the June lows, off 12% this calendar year to date. While today’s bounce back was far from convincing, we are seeing signs of some improvement with a number of sectors/stocks attracting strong buying. When we stand back and consider the overarching positioning at the moment, with the consensus being very bearish, we think a bounce from these levels is the more probable outcome.
We are amending the Flagship Growth & Income Portfolios
The ASX200 tumbled another 105-points yesterday closing less than 1% above this year’s low posted back in June, Monday’s selling was specifically focused in the Energy & Resources Sectors e.g. Whitehaven Coal (WHC) -14%, Woodside Energy (WDS) -5%, IGO Ltd (IGO) -7.6%, South32 (S32) -7% and BHP Group (BHP) -5.2%. Interestingly the market’s weakness wasn’t very broad-based for such a disappointing session with over 25% of stocks and 45% of sectors managing to close in positive territory – more on the divergence later.
A downbeat start to the new trading week with the ASX off more than 1%, although it wasn’t all bad news with some pockets of strength emerging as the day progressed pushing the index +50 points above the early morning lows. Healthcare was a standout +1.97% while recessionary fears led to declines in Energy (-6.30% and Materials (-5.27%).
Equities are experiencing a September to forget and although most indices haven’t yet broken below their June lows things are “feeling” worse this time around e.g. the S&P500 closed on Friday 1.6% above its mid-year low but the Dow ended the week at fresh lows for 2022. There was no really good news on either the macro-economic or geopolitical front but we feel it was a trifecta of semi-left-field news that sent stocks reeling e.g. the S&P500 tumbled -4.6% and while the ASX200 fared better only falling 2.4% it’s set to open down another -1.25% this morning. The problem for stocks came from 3 different continents which combined with rising interest rates created a major headwind for risk assets:
The ASX200 tumbled into the Feds FOMC meeting on Wednesday only to compound the losses throughout an awful session on Friday which ultimately resulted in the local market falling over -2.4% for the week, with all 11-sectors closing lower led by the interest rate sensitive Tech, Utilities, Real Estate and Consumer Discretionary Sectors – all of which fell around 5%, or more. The Fed and Bank of England combined forces to dash market hopes that interest rates were approaching their peak, if anything the fight against inflation has been ramped up:
The Fed hiked rates by 0.75% and the BOE by an aggressive 0.5%, which poses the question what next from the RBA in 2-weeks’ time?
The big shake up from the Fed was delivered by its rhetoric – Jerome Powell said that a “soft landing for the US economy will be very difficult to achieve” i.e. buckle up for a recession.
The rout in the ASX resumed today after yesterday’s holiday. Weakness in risk assets came on the back of rate hikes from the US Fed (+75bps) and the BOE (+50bps), while the FOMC Chairman also warned of a recession. Today the market was concerned with a hit to earnings expectations and the higher discount rate that comes with a hawkish Fed. Materials held up in the face of the selling as iron ore found some support thanks to improving construction activity in China and the hope for further stimulus here.
The Australian market was closed over the Feds FOMC meeting for a National Day of Mourning for Her Majesty The Queen, normally a 24-hour pause wouldn’t be noticed by stocks but this was no ordinary rate decision and accompanying minutes from the Fed:
The ASX was hit more than 100 points today ahead of the public holiday tomorrow, obviously, overnight weakness in the US played into this, however, the outcome of the FOMC meeting tonight and our inability to react to whatever happens until Friday was enough to see traders take risk off the table into a day of light volumes. A weak open, a meander lower throughout the session before another leg lower on news that Putin had announced a partial mobilization saying that the West had tried to “turn Ukraine’s people into cannon fodder.”
