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MM is adding a new position to the Active Income Portfolio today.
The ASX200 closed up more than 2% on Tuesday, with the market enjoying broad-based buying. All 11 major sectors advanced, led by Tech, while the defensives were the laggards. In yesterday’s report, we discussed volatility, but a few subscribers who liked the piece felt it was lost being too far into the daily missive; hence, here’s a follow-up summary, arguably even more pertinent after the last 24 hours.
The best days in the stock market often occur right after the worst days. 7 of the 10 best days in the market happened within two weeks of the 10 worst ones. Today was an example, as we chalked up the best day since 2022 with the ASX 200 up 2.3%, with all sectors finishing higher, led by the beaten-up technology stocks which have declined 25% since the start of February.
The ASX200 fell another 4.2% on Monday, its largest one-day drop since 2020, as concerns continue to escalate that Trump’s aggressive tariff policies will send the world into recession. The moves across a range of financial markets on Monday were pricing in a recession as “un fait accompli”, especially in the morning.
Markets chalked up their worst day since the depths of Covid a little over 5-years ago, though, it wasn’t as bad as it could have been, with US Futures building on Fridays steep losses, trading down another 5% on our open with Asian markets also feeling the heat, Hong Kong shares down 12%, China & Japan off 8%.
We are making two changes to the growth portfolio today.
In the Rose Garden on Wednesday, Trump declared, “Jobs and factories will come roaring back into our country” and predicted a new “golden age” in America – financial markets do not agree. On Friday night, he compounded market fears by stating that his decision to hike US tariffs to their highest levels in over a century would not change, despite sparking a global market meltdown.
Financial markets went into “Panic Mode” on Friday night after China’s commerce ministry announced a 34% tariff on all U.S. products, disappointing investors who had hoped countries would negotiate with Trump. Xi Jinping has reacted “harder and faster” than markets expected, causing markets to plunge in a matter of seconds as fears of a Global Trade War escalated. Our take is Trump may be out of his depth; this is not a property deal. This feels like the US (Trump) versus the rest of the world! Selling intensified into the close on the fear, as we go into the weekend, that the trade war will escalate when the markets are closed, and the US doesn’t back down; it is very hard to see the US obtaining a good result from here, and Trump keeping face.
Some significant moves playing out across equity markets today, with ~70 stocks in the ASX 200 down more than 5% led by the high beta names, Macquarie (MQG) -9% indicative of the weakness, falling the most since 2022.
The ASX 200 fell 0.9% on Thursday, a win compared to the melt-down unfolding across global markets. The key takeaway from Trump’s much-discussed global tariffs is that the US now risks a recession this year, and inflation could surge, a worrying combination for equities. The only positive on the day was that markets have increased bets that the Fed will cut rates further through 2025 despite the possible uptick in inflation. Credit markets are now pricing in nearly four rate cuts by the Fed into Christmas. Ironically, US equities and the dollar bore some of the worst selling on speculation the president’s trade offensive will stunt the American economy, which is certainly understandable – tariffs are ultimately bad for growth, the US looks to have kicked an own goal, for now at least.
