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Last week saw the ASX200 extend its stellar recovery ignoring soaring bond yields in the process, the local market is set to open this morning less than 2.5% below its all-time high yet the RBA is forecast by a number of economists to hike rates from todays 0.1% to 1.0% by Christmas – not big numbers compared to previous decades. However the comparison of Australian 3-year bond yields and the RBA Cash Rate makes a strong argument that we could even be looking at 2% by 2023, the banks aren’t silly just look at their moves over the last week to get a sense of what they believe is on the horizon:
The ASX200 enjoyed another strong week to take March’s rally to over 5%, under the hood a mixed bag of Utilities, Resources and IT stocks all enjoyed strong moves while the banks remained supportive of the index. As we slowly but surely edge towards fresh highs MM expects volatility to increase on the stock level as fund managers pick out different names they believe have run too hard but we feel the general absence of sellers will remain and could April deliver some reversion on the stock / sector level as investors take profit on the top performers while chasing value in names which look ready to play some catch up. The variance has been huge across the board as we approach the end of Q1 of 2022:
A marginally positive session today with the market chopping in a tight +/-35 point range closing back above 7400, Materials strong thanks to strength in the Iron Ore price while Healthcare struggled.
The ASX200 demonstrated its resilience yesterday after managing to eke out a small gain even after the Dow fell over 400-points, we believe the local market will continue to outperform the US over the coming weeks / months. The market peaked at 7399 into the close helped a recovery by the US futures during our day session but by midday the ASX had already confirmed the notable absence of any selling into weakness. The markets now rallied +6.2% from its March low to test 10-week highs, we remain bullish with fresh all-time highs feeling increasingly likely as different sectors of the market take it in turns to drag the index higher.
There was every opportunity for the market to pullback today, the ASX 200 is up ~6% on the most recent drive from the ~7000 handle, US markets were down around 1.3% overnight, Asian markets were mostly lower and while US Futures were up, it wasn’t by a big margin, but still the ASX recovered from the early lows, supported mainly by Energy & Materials to actually finish up on the day – a good effort.
MM are tweaking the Emerging Companies, International Equities & ETF Portfolios
The ASX200 enjoyed a strong “Hump Day” to close up exactly 0.5% higher registering its highest close since mid-January – it’s now only 3.5% until local stocks challenge their fresh all-time highs. Again we saw the banks perform the heavy lifting with CBA rallying to within 2.6% of its December high, even after trading ex-dividend $2.00 fully franked in February, investors will receive this tasty morsel in the 1st week of May. The IT stocks were the standout over the session rallying 3.5% while the major miners slipped slightly lower, MM believes tech stocks will maintain this outperformance over at least the coming weeks – remember it’s only a bounce for growth stocks after an awful 6-months.
The ASX marched higher today supported by another strong rally in the technology stocks while talk of further buy-backs amongst the banks saw the sector well bid. Overall, the market is net bearish given the confluence of negative headlines and a bunch of traders we talk with are scratching their heads trying to reconcile the moves, however the simple explanation is when the marginal seller has already sold and are positioning for the pullback, stocks often move in the other direction – it’s all about positioning for now.
The ASX200 rallied another +0.86% on Tuesday helping it scale fresh 9-week highs, it might surprise many readers to know it’s now less than 4% below its 2021 all-time high – the markets literally had the kitchen sink thrown at it for the last 7-months but only the staunchest bears could argue it hasn’t performed admirably. We only saw 54% of stocks rally yesterday but when the banks remain firm and resources soar the ASX is going higher e.g. BHP Group (BHP) rallied +5.1%, perhaps some of the $10bn landing in shareholders accounts next Monday has already started filtering itself back into the miner.
While the ASX ended higher, it was the second straight session where stocks finished well off the early highs, yesterday it was ~70pts, today was half that however it all came in the last hour of trade. The Material stocks bounced back fairly hard today, BHP +5.1% had a big influence on the broader market adding +35 points to the ASX 200 alone, while the IT names slipped lower.
