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MM is tweaking two portfolios
Arguably the weak link of the MM Flagship Growth Portfolio through 2023 has been our overweight healthcare exposure i.e. we have 13% in the Healthcare Sector which is above the 10% of the broad index. Hence, if we are overweight a sector that’s not delivering results we must reassess, especially after its largest member and the 3rd largest stock on the ASX suffered a rare negative rerating yesterday.
Commodity stocks were the place to be today enjoying the more bullish rhetoric coming from China, the sector underpinning a solid move higher at the index level and more than offsetting a softer-than-expected update from heavyweight CSL.
The elastic band continues to stretch between the top performing tech sector and the underwhelming value names such as banks & resources but as MM has been regularly trotting out the last 12 months has been about the strong getting stronger, and in our opinion, until the world regains confidence that the global economy can avoid a painful recession in today’s new high-interest rate environment, this trend could continue.
A positive session to kick off the shortened week which will be dominated by key US economic data. CPI Inflation tonight in the US is expected to be benign, up just 0.1% MoM and 4.1% YoY, down from 4.9%. This should mean the Federal Reserve holds rates at 5-5.25% on Thursday, although the market has largely priced in another 0.25% increase in July.
Investors and traders alike are going to be bombarded with a plethora of economic news this week, firstly the US CPI (inflation) data is released tonight followed by the latest US Federal Reserve interest rate announcement on Wednesday night while the European Central Bank (ECB) steps up on Thursday followed by the Bank of Japan (BOJ) on Friday, if all goes according to “expectations” the ECB will be the only central bank to hike, or move for that matter, but 2023 has already thrown up plenty of surprises.
The ASX200 experienced an eventful week which included surprise rate hikes by both the RBA and Bank of Canada yet the local market ended the week down just -0.3% however it was a far more interesting week under the hood of the market as the aggressive moves by central banks plus accompanying hawkish rhetoric changed investors sentiment on the stock and sector level:
A solid end to a choppy week for the ASX that was dominated by another 25bps rate hike by the RBA. Sector rotation remains a constant with the first cracks appearing in the recent tech rally while the resource stocks found their feet and edged higher, inline with our recent commentary that tech was vulnerable and we should continue our patient transition towards commodity stocks.
The RBA surprise (kind of) rate hike and accompanying hawkish rhetoric have sent Australian 3-year bond yields to decade highs, an unlikely backdrop for a surging tech sector but we cannot argue with the tape – plus we should never forget the new world in which we live where advancing and evolving tech is reshaping business.
A choppy and ultimately negative day for the ASX where buying in Energy & Materials was more than offset by a sharp pullback in Tech, although weakness was obvious right across the sectors negatively influenced by higher interest rates.
