Archives: Reports
With the new higher interest rate environment likely to continue to influence investors’ risk appetite, as we’ve witnessed by the repricing of the growth sector, today we have revisited the defensive supermarkets which could be interesting if we do see a short-term rally in the ASX200 i.e. an area to switch to if MM wants to move down the risk curve.
A bit of a nothing session today for the ASX, the best of it was seen early with the index up ~30pts at its highs before a lacklustre afternoon session saw the gains evaporate, Energy the biggest drag overall while the banks came off as the day wore on.
At the end of last week, speculators started to “attack” Deutsche Bank, in our opinion, they are not comparing apples with apples but investors are concerned about the German bank’s exposure to US commercial real estate. We see no reason why DBK should see any contagion apart from the obvious psychological factors, we’ve avoided catching the falling knife around global banks but if the very profitable DBK breaks below its 2022 low it’s going to look tempting from a valuation perspective – a failed attempt by short sellers with DBK could ultimately restore confidence to the banking sector.
The ASX200 experienced a quiet week on the surface with the index closing down just 40 points / or -0.6% while under the hood there were some standout winners & losers but interestingly the much-discussed banking stocks were fairly quiet with the “Big 4” averaging a drop of just -1.5%. On a sector level, the banks and real estate names weighed on the index while on the stock front gold names again shone brightly while the ESG names (lithium) continued to struggle:
An eventful week in markets came to a close with the ASX down a touch, although we did see a spirited fight back from an early sell-off with the ASX 200 rallying +32pts from the day’s low. Banks on the nose still but more companies finished in the green than the red – some corporate activity implying that it’s not all doom & gloom out there!
US stocks experienced another mixed session overnight after initially rallying strongly before indices then reversed before finally recovering as Yellen tried to undo her comments yesterday, the Dow closed up +0.2% while the tech-facing NASDAQ posted a gain of +1.3% – at about 6 am this morning Yellen said that “the US is prepared for additional deposit actions if required”, it appears that she’s been scolded by the powers that be but after watching the relative lack of impact it feels like the damage has already been inflicted on market confidence.
The choppy market action continued today as the ASX200 bounced along the bottom of its current trading range – for now at least – with a lot of indecision playing out in both equity and bond markets. Significant disparity between market pricing and central bank rhetoric is one element at play overlayed by lingering concerns around the financial sector, the huge volatility in bond markets is not helping!
The market’s ongoing belief that the global economy is moving toward an inevitable recession combined with China’s fairly muted growth targets for 2023 has sent energy prices tumbling from their dizzy highs just one year ago e.g. Brent Crude is trading 45% below where it was this time last year. However, we are conscious that stocks often lead major tops/bottoms in their underlying commodity prices, which in turn generally run 6-12 months ahead of the economy hence we are starting to look for clues that “enough is enough” on the downside for the energy complex.
Another positive session pushing the ASX 200 back up through 7000 as a strong bounce back in Energy and steady buying in Materials & Financials underpinned strength at the index level, 70% of the market finished the day on the right side of the ledger as nerves start to calm – for now at least, ahead of the US interest rate decision tonight.
We are making a number of amendments to the Emerging Companies Portfolio.
