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The market was strong early with futures rallying ~75 points at the outset however weaker than expected data from China saw the market roll over mid-morning. IT stocks had a 2nd session of gains as bond yields continued to stabilize while a takeover tilt for Brambles (BXB) saw the Industrials fire up.
As today’s title suggests this time next weekend may deliver Australia a new Prime Minister, the bookmakers have Labor as a clear favourite but such is the huge macro influences at play in today’s stock market Morrison, Albanese etc are hardly getting a meaningful mention in terms of driving stocks in either direction. So far as we all know 2022 has been all about surging inflation and bond yields e.g. Australian 3-year bond yields have already more than tripled this year and we’re still not into June. The ASX200 has dipped more than 9% over the last few weeks and investors have become more bearish than I can recall since the GFC.
The ASX200 ended an extremely tough week with some bargain hunting finally emerging on Friday which helped the index bounce strongly to close almost 2% higher, basically halving the week’s losses in the process. The story under the hood of the ASX has been fairly consistent throughout both May and 2022, high valuation / tech stocks have been hammered as bond yields scale multi-year highs courtesy of surging inflation. However when we have enjoyed positive days it has largely been driven by the same stocks springing back with a vengeance:
Friday’s green on the screen to round put a bit of shine on a pretty dull week for equities. All sectors traded higher into the weekend, no better exemplified than the worst sector for the session, Consumer Staples, still finishing +0.84%. Tech was the clear standout though, rallying more than double it’s nearest rival. The rally today wasn’t enough to offset the selling seen over the rest of the week with the ASX200 falling 130pts/-1.81% to post it’s fourth consecutive weekly fall.
The ASX200 was smacked -1.75% yesterday in a session that both felt and looked awful, aggressive selling hit the futures market as soon as stocks opened and it didn’t take a backward step all day – intraday alone the SPI futures fell 110-points compounding the negative opening courtesy of further weakness on Wall Street. Not surprisingly all 11 sectors fell on Thursday but tech was again the standout dropping -8.7%, a sector move that would usually be associated with a quarter as opposed to one day!
Technology stocks were smashed today, the IT sector down 8.7% with 10+% falls commonplace at the large end, & 15%+ at the small end as big & consistent sell-orders rocked through the market. Slightly hotter than expected inflation data in the US overnight was the main catalyst it seems, but whatever the case, it was just one of those risk-off sessions that saw the index slide all day while the selling in some stocks was extreme. A terrible day for the market even though 2 of the big 4 banks finished the session up!
For a second consecutive day, the ASX200 recovered strongly from early morning losses and although the markets still well down for both the week and month it’s finally attracting some bargain hunters into weakness. Ultimately we only saw the market rally +0.2% on Wednesday but it was a solid performance considering National Australia Bank (NAB) and ResMed (RMD) traded ex-dividend plus the overall Banking Sector drifted lower, on the positive side of the ledger the healthcare / real estate stocks finally enjoyed a bounce. Volatility remains the constant so far in 2022 as the index continues to rotate between 6700 and 7650, it’s now 13-months and counting.
The market was in a holding pattern today ahead of important April inflation data in the US tonight – that number will likely drive the next leg up or down in bonds which will have a big bearing on equities. Looking at the volatility in the US market overnight (the Dow trading in an +/- 850 point range), it’s fair to say that there is a lot of indecision – traders are jumping at shadows while there is clearly some pain being felt around the place forcing a de-risking of portfolios, another 50 point…
We are making some changes across four of the Portfolios.
Flagship Growth: Cutting VUK & adding to MQG & TPG
Income: Cutting IGL & buying a Government Bond
Emerging Companies: Cutting WSP & buying LYC
International EquitiesL Cutting AMZN US & buying TSCO LN
The ASX200 fell another 1% yesterday although we finally saw some bargain hunters enter the market mid-morning after a ~$1.75bn dollar stop appeared to be triggered in the SPI Futures as we finally saw some signs of panic capitulation style selling – traders usually look for such moves before calling a market bottom. The recovery was reasonably broad-based as we went from only 2% of the ASX200 being up on the day to 33% come the close with a number of high beta growth stocks catching a distinct recovery style bid tone e.g. REA Group (REA) +5.5% and Xero (XRO) +4.2%.
