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The ASX200 finally enjoyed a strong week even after surrendering -0.8% on Friday, the local index still rounded out the 1st 5-days of October up +5.5%. I know it’s very early days but the bears shouldn’t dismiss the seasonal strength stocks have enjoyed through Q4 over the last 20-years especially when we consider the weakness through the first 9-months of the year. Last weeks main catalyst for strength in local stocks came from the RBA although US stocks gave a helping hand early on:
The market felt a bit like the weather in Sydney today with a soggy end to the week. The weakness came on the back of comments from the Fed and the ECB staying committed to crushing inflation, though the ECB was a little more dovish than previous comments. Energy was the standout today as oil traded higher – OPEC flagging production cuts earlier in the week despite the market remaining tight triggering a rally in the oil price.
We are selling Tesco (TSCO LN) & buying Blackstone (BX UK)
The ASX200 had a quiet Thursday, especially when compared to the previous two sessions, the index closed up less than 2-points with losers actually slightly outnumbering the winners. Another strong performance by the Energy Sector managed to edge the index higher but outside of the likes of Whitehaven Coal (WHC) and Woodside Energy (WDS) it was a relatively uneventful trading day which felt at its most comfortable trading basically unchanged – no great surprise after already rallying +6.5% from Monday’s intra-day low.
A day of consolidation following a 2.5 day bounce that saw the ASX up an impressive ~6%. Energy the standout sector today with OPEC production cuts supporting prices while Utilities bounced back 1.08% after having been the weakest sector in September, down a whopping 13.8%.
The ASX200 enjoyed another major “risk on” session on Wednesday, we even saw weakness in the US futures ignored throughout our day session as small intra-day dips were bought before they hardly started – no great surprise to MM when we consider how bearish investors & fund managers had become. Readers should remember that last month’s Bank of Americas Fund Managers Survey showed Fund Managers were holding their lowest ever allocation to global equities, or in other words, as we’ve been pointing out who will be left to sell. However, we caution subscribers around becoming too bullish into strength:
Another positive session for the ASX with the market now up ~400pts/6.2% from the low set at lunchtime on Monday when half the country was enjoying a long weekend. As is so often the case, the market made a new marginal low (6411) as stops were triggered before reversing aggressively staging an impressive 2.5-day rally to kick off the new quarter. Interest rates are clearly the main game in town and with some softening of economic data, the window is now open for central banks…
We are making a number of changes across portfolios.
The RBA demonstrated some admirable independence yesterday as it hiked interest rates by a moderate 0.25% ignoring hawkish rhetoric from other major central banks in the process, a great call in our opinion! With a large proportion of Australian mortgages going to be linked to the Official Cash Rate by the end of next year there’s undoubtedly going to be a significant headwind for the Australian consumer in the not too distant future, we believe this lag effect is likely to have played a significant role in the decision from Philip Lowe et al.
A very bullish session for the ASX today – the biggest gain in two years – with the RBA raising rates by a more modest 25bps versus 50bps expected. Bond yields fell sharply, the Aussie 3 years tanked 40bps in a heartbeat, the AUD dropped and equities surged, however, stocks were rallying into the move with the ASX up ~150pts before the 2.30pm surprise decision and then went another +100pts after it.
