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We’ve written about sector rotation a lot in recent notes and today was another clear example of the theme playing out, with banks underperforming resources by a significant ~2.5%. News that Warren Buffett was selling down bank holdings was sighted as a catalyst, and it probably played a part.
Since April, global indices have shrugged off bad news almost with disdain, leaving many pundits looking for new reasons to justify a potential fall in stocks. Most importantly, for all the political noise and recession warnings, the linchpin US economy remains resilient, allowing markets to scale new heights.
The ASX200 rallied another +2.1% last week, posting a fresh closing high on Friday, extending July’s gain to +2.5%. Gains were broad-based over the five days, with all 11 of the main sectors closing higher, led by Tech and healthcare, which surged +5.2% and +4.8% respectively. The trend remains clearly bullish, and while the average gain for the month of July over the last decade is around 3% equities are breaking to new highs with strong momentum, and as we mentioned on Friday morning, the surprises in markets usually unfold with the trend – the best two Julys of the last decade have delivered gains closer to 6%.
Bang! The ASX broke out of its recent tight trading range today, trading above 8700 for the first time, buoyed by coordinated buying across the material and healthcare sectors, with technology also having a good crack. Softer employment data yesterday brings into play 3 rate cuts this side of Christmas, which is a bullish catalyst, however, today looked more momentum driven, with a clean break above a 6-week trading range, dovetailing in with low school holiday volumes – a quick trip into the city this am and a strong market – a win/win
We are making changes across two portfolios today
The ASX 200 closed up +0.9% on Thursday, posting both a fresh intraday and closing high. The catalyst being a surprisingly weak June jobs report, which increased the case for three rate cuts before Christmas – two were already being fully factored in.
A positive open this morning, but the buyers really kicked into gear following softer employment data out at 11.30am which opens the door for a rate cut at the next meeting, they should have cut last week! Rate sensitive sectors faired best, though the love was broadly spread with 80% of the main board ending higher.
The ASX200 took a 0.8% hit on Wednesday, its worst session since early May, with over 65% of the main board retreating. Rising long-term bond yields and ongoing uncertainty around tariffs proved too much for a market striving to post new highs.
The ASX had its worst day since 5th May today, which implies we’ve had a pretty good run in stocks despite ongoing trade uncertainty. The market was hit on the open, with all sectors trading in the red before recent trends emerged; banks experiencing ongoing selling while resources bounced from their intra-day nadir.
The ASX200 surged +0.7% on Tuesday following broad-based gains, which saw 70% of the mainboard close higher. The index posted a fresh record closing high for the second time in a fortnight, ignoring plenty of negative news along the way. Ironically, the only sector which slipped on the day was the materials even after China reported better-than-expected quarterly economic growth, although we wouldn’t be surprised to see this translate to some buying in the miners into August.
