Archives: Reports
Famed portfolio manager Hamish Douglass has moved Magellan’s portfolio to 50% defensive although like ourselves he remains basically fully committed to equities. He believes many investors are ignoring the risks of a bumpy post COVID economic recovery citing virus mutations as one of many risks that could derail the stimulus / free money led recovery.
Volatility has kicked up on the market with a big range playing out today, buying amongst the banks / financials offset by decent weakness in the healthcare sector. A lot of stocks traded ex-dividend today and that took about ~25pts from the market, so it looked worse than it actually was but still, there were clear pockets of decent selling, CSL for instance went Ex-Divi for ~$1.34 and fell $11.17. BHP and RIO were also trading Ex-dividend today which talked to the weakness in the Material sector today.
The choppy price action of the last month continued unabated yesterday with the ASX200 bouncing 55-points to close back above 6800, basically at the same price it started February. Over the last month of trading the local markets remained within 2% of this area, its felt like there’s been an imaginary elastic band snapping stocks back whenever they attempted to move either up, or down, to a new level of equilibrium.
The ASX looked very weak this time yesterday after dropping 100pts from the morning high, however the old mantra of buy weakness, sell strength has clearly remained in play. It feels like this saying (for MM at least) is becoming repetitious however that’s often the case in markets, things repeat themselves, until they don’t!
The ASX200 continues to dance the volatility jig after falling almost 100-points from its intraday high on Tuesday following comments out of China which appeared to spook the market, although I would note that selling of strength has been a common characteristic through 2021 to-date. The news flow between East and West central banks / regulators was almost diametrically opposed yesterday but with Chinas comments the most unexpected addition to the mix it had the most impact, probably a combination of surprise factor and global equities had been roaring higher over the last 24-hours:
In with a bang, out with a whimper today. Equities were well bid early with stimulus & QE back on the agenda in the US. From there though, the sellers had the upper hand – China’s banking regulator warned of asset bubbles and signalled it would look to reduce leverage in its system. That set off a chain of selling in the region seeing Asian markets slide from ~1% up to ~1% down. The local market faired a touch better than its regional peers, though still finishing the day ~1.5% below the intraday high.
In just a couple of back to back sessions the ASX200 has endorsed our call for elevated volatility in 2021 – on Friday we fell 161-poinrts before recovering 116-points yesterday, not ideal price action for the faint hearted investor! As we’ve maintained for months MM believes stocks have entered a period where they will take “3 steps forward and two back”, the style of choppy rotation which regularly punishes investors who follow natural human emotion and sell weakness & / or buy strength. With more than 80% of the local market closing in positive territory on Monday our roadmap for both March and 2021 remains on course:
A bullish session for the ASX to correspond with the roll out of the new MM website – hope it’s a good omen! Many of you have sent through positive comments, thank you, and a few have had some frustrating login issues which I apologies about. We will get there and we are confident that the MM experience will only grow from here as the depth of content expands over time. If you have further feedback, we’d love to hear it.
The ASX200 fell 120-points / 1.8% last week with all of the losses, plus more, occurring on Friday as rising bond yields shook the confidence of global equities. Friday was the last trading day of February and it’s common that volatility becomes elevated at both the start and finish of a month, interestingly both January and February saw early strength with tops on the 17th & 25th respectively before weakness saw most of the months gains lost in fairly rapid fashion – as we’ve said previously it feels like the airs getting thin whenever 7000 is on the horizon. From a seasonal perspective the next few months are pretty neutral before weakness usually sets in for May & June hence at this stage we believe that MM’s mantra for 2021 of “buy weakness and sell strength” remains very much in play especially when we consider the last 2 months.
The ASX200 enjoyed a strong bounce on Thursday but after 4-days of choppy trading the market remains in a tight consolidation around 6800. As we all know bond markets are playing the tune for equities in 2021 so far and this week’s seen the Australian 10-year bond yield surge form 1.43% to 1.74%, that’s a whopping +22% increase in yields in just a few days compounding the more than +75% increase in less than 2-months, its not hard to see why investors are becoming fixated with the global economic recovery i.e. reflation. We only have to look under-the-hood of the ASX at some major stocks to see how its significantly transforming the stock / sector performance so far in 2021:
