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We are selling Tesco (TSCO LN) & buying Blackstone (BX UK)
The ASX200 had a quiet Thursday, especially when compared to the previous two sessions, the index closed up less than 2-points with losers actually slightly outnumbering the winners. Another strong performance by the Energy Sector managed to edge the index higher but outside of the likes of Whitehaven Coal (WHC) and Woodside Energy (WDS) it was a relatively uneventful trading day which felt at its most comfortable trading basically unchanged – no great surprise after already rallying +6.5% from Monday’s intra-day low.
A day of consolidation following a 2.5 day bounce that saw the ASX up an impressive ~6%. Energy the standout sector today with OPEC production cuts supporting prices while Utilities bounced back 1.08% after having been the weakest sector in September, down a whopping 13.8%.
The ASX200 enjoyed another major “risk on” session on Wednesday, we even saw weakness in the US futures ignored throughout our day session as small intra-day dips were bought before they hardly started – no great surprise to MM when we consider how bearish investors & fund managers had become. Readers should remember that last month’s Bank of Americas Fund Managers Survey showed Fund Managers were holding their lowest ever allocation to global equities, or in other words, as we’ve been pointing out who will be left to sell. However, we caution subscribers around becoming too bullish into strength:
Another positive session for the ASX with the market now up ~400pts/6.2% from the low set at lunchtime on Monday when half the country was enjoying a long weekend. As is so often the case, the market made a new marginal low (6411) as stops were triggered before reversing aggressively staging an impressive 2.5-day rally to kick off the new quarter. Interest rates are clearly the main game in town and with some softening of economic data, the window is now open for central banks…
We are making a number of changes across portfolios.
The RBA demonstrated some admirable independence yesterday as it hiked interest rates by a moderate 0.25% ignoring hawkish rhetoric from other major central banks in the process, a great call in our opinion! With a large proportion of Australian mortgages going to be linked to the Official Cash Rate by the end of next year there’s undoubtedly going to be a significant headwind for the Australian consumer in the not too distant future, we believe this lag effect is likely to have played a significant role in the decision from Philip Lowe et al.
A very bullish session for the ASX today – the biggest gain in two years – with the RBA raising rates by a more modest 25bps versus 50bps expected. Bond yields fell sharply, the Aussie 3 years tanked 40bps in a heartbeat, the AUD dropped and equities surged, however, stocks were rallying into the move with the ASX up ~150pts before the 2.30pm surprise decision and then went another +100pts after it.
Stocks entered October in the same vein as the departed September i.e. weak and nervous. On Friday night global stocks fell to a 2-year low on growing concerns that hawkish central banks will plunge the world into a recession which by definition will lead to painful earnings contraction for the majority of listed companies. Today at 2.30pm the RBA is expected to hike rates another 0.5% even if they have been considering a more moderate 0.25%, MM believes it’s unlikely they will have the individual fortitude to buck the global trend and ease off on their recent hiking…
The ASX200 tumbled into the close on Friday ending September on the same note as most of the last 6-weeks, the greater than 500-point monthly decline has been primarily instigated by rhetoric from the Fed who turned very hawkish at the end of August following the Jackson Hole economic symposium, and ongoing comments from the board have maintained the pressure on risk assets ever since. Investors started last month focusing on rising interest rates before later worries also started to encompass fears around a recession into 2023, and specifically how deep/long will it be.
