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In April, the $250bn Future Fund said it was now backing active fund managers switching out of the passive approach they had employed for the past 6 years. The changing economic backdrop now lends itself to active management, with Chief Executive Raphael Arndt declaring that “Conditions have changed. Economies are diverging and companies can better distinguish themselves in a more challenging environment”. We certainly agree at Market Matters with our portfolios enjoying the changing dynamics that are at play as tougher macro conditions are making it easier to distinguish the haves and have-nots.
A reasonable session after a weaker open this afternoon saw the broader market grind higher throughout the day. Some interesting company news out, with CBA providing a solid quarterly to round out bank reporting while Worley (WOR) held a strategy day where they outlaid the huge opportunity in front of them with the energy transition, and importantly, focussed on how they would grow margins.
There has been phenomenal hype in recent years around Lithium and other key commodities that underpin the global move towards Electric Vehicles (EVs), and we think there is a solid foundation to this sector, however, the shorter-term movements in the Lithium price for example, where a pullback of ~70% has recently played out, highlights a theme that MM often speaks of, around crowded trades creating risk.
A bullish start to the trading week with the risk-on sectors doing best following a stellar session on Wall Street all the way back on Friday night. Lots of analysis out this morning as brokers re-cut their numbers following a flow of trading updates last week (a result of MQG conference), with a lot of news flow stemming from some of the more interesting sectors – namely Lithium & Rare-Earths – more on these sectors in the AM report.
MM is switching from WDS to WOR
The ASX200 reacted badly to the “surprise” RBA rate hike but after a rapid 250-point drop buyers returned albeit in very specific pockets of the market e.g. ESG and gold names. The markets experienced a rollercoaster ride of sentiment over the last 2-year yet the markets remained largely range bound between 6500 and 7600, in this case we believe it’s a case of if it’s not broken don’t fix it i.e. de-risk in the 7400-7600 area and increase market exposure/risk below 6750.
The ASX200 fell -1.2% last week following a poor performance from the banks both at home and in the US, the ASX200 Financial Sector closed out the week down -3.4% while the Utilities and Real Estate Sectors were the only 2 market pockets to close in positive territory. The local banks suffered as the US regional Banks plunged another -20% before bouncing on Friday while local sentiment soured following Thursday’s disappointing result from National Australia Bank (NAB), better earnings from ANZ Bank (ANZ) and Macquarie Group (MQG) on Friday weren’t enough to repair the damage
A positive session to end a tough week for the market with some confidence stemming from solid results out of ANZ & Macquarie (MQG) despite the latter ending lower on the day. For the week, the ASX 200 lost 1.22% with the financials the biggest headwind, while it was pleasing to see a bounce back in the property sector despite the increase in rates – a sign that the market believes rates have hit their peak!
The ASX200 had felt tired over recent weeks but that’s now translated to outright vulnerability as buyers retreat on worsening economic/company news which is leading to increased weakness in the current low-volume environment. However, not all stocks/sectors are moving as one as we saw yesterday when the banks fell after NAB’s result while the resources enjoyed a strong session e.g. oil stocks rallied even after a more than 4% dip by crude oil.
The market opened sharply lower this morning before a spirited ~50pt fightback that saw 75% of the main board actually finish up on the day. Banks dominated following a weaker than expected 1H23 result from NAB which threw the cat amongst the pigeons, weakness in the big 4 taking 44pts off the ASX200 ahead of ANZ & Macquarie (MQG) reporting tomorrow, while Westpac (WBC) is out on Monday.
