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This morning we’ve evolved the title of the last two weeks Macro Report from “Here comes the bounce – 1 & 2” to one of two main catalysts which MM can see driving such a bounce although we will touch on both. Firstly, the influential Banking Sector which has been under pressure all year in the US, whereas locally the weakness has only noticeably unfolded from April, on Friday the US KBW Bank Index surged +5.8% following a strong 2nd quarter result from Citigroup which sent its stock up +13% plus Wells Fargo rallied +6.2% after delivering a lift in net interest income. Importantly at least for the next few months we now believe the…
The ASX200 experienced another choppy week which threatened to break out on both the up and downside, but after 2-weeks the broad market remains basically unchanged for July. However under the hood the market’s throwing up some interesting sector rotation, when we consider the extremely hawkish economic data we’ve received from a different number of countries, the outperformance by the likes of tech and healthcare suggests investors are tweaking their portfolios towards “peak inflation” occurring around now, and a possible recession in 2023, the following moves so far this month are certainly pointing this way:
While the ASX ended lower, the intra-day move mirrored that of Wall Street with a sharp sell-off early on followed by a sustained fightback in the latter part of the session, the ASX 200 down ~116pts at the lows before rallying +68points to close the session down 45. Resource stocks the biggest headwind on broad-based selling of commodities overnight while the defensives did their job today.
The ASX200 shrugged off red hot US inflation on Thursday to eke out a solid +0.4% gain with Tech stocks finally leading the line even as bond yields rallied and pundits started weighing up whether the Fed would follow the Bank of Canada and hike interest rates by 1% come their July 28th meeting – it feels almost ironic that markets are convinced interest rates will accelerate higher just as a 3rd wave of Covid casts another dark shadow over the economy. Bond markets are effectively telling us they have very little faith that the Fed can successfully & orderly navigate the current 40-year high inflation rate:
A reasonable day for Australian stocks despite a hotter than expected inflation print in the US overnight – the index opening on the front foot and remaining firm for the session – buying in the technology, energy and materials sectors was the obvious takeaway which certainly suits our current positioning.
The ASX200 managed to rally +0.2% yesterday as strength across the broad market was enough to offset selling in the Resources Sector following the significant declines from the likes of copper and crude oil on Tuesday night. The market actually closed on its highs after reversing early losses as some bargain hunting entered previously weak pockets of the market although investors will need convincing that a recession isn’t imminent before we’re likely to enjoy some meaningful follow-through.
We are buying HCA Healthcare (HCA US) in the International Equities Portfolio and the Global Copper ETF (COPX US)
US inflation data will be an important release tonight and that will have a big bearing on where markets go from here. That uncertainty was obvious in the local market today with the index trading in a tight range, before popping higher into the close. The Energy and Resource stocks hit hard, particularly in early trade before some recovered while the retailers and IT stocks did well.
We are making a large number of changes across the domestic portfolios today, with a further alert to come for our international holdings later in the day.
The ASX200 drifted steadily lower throughout Tuesday to close up just 4-points after being almost 50-points to the good earlier in the day, fortunately for the index the banks were firm on yet another day when investors showed zero interest in buying strength. Ultimately less than 35% of stocks closed up for the session which saw further weakness across the Resources Sector as recession fears continue to gather momentum, a number of major miners made fresh multi-month lows including the 5 below while others look destined to follow their lead over the coming days:
