Archives: Reports
A soft start to the week as the ASX was dragged lower by sharp moves in commodities and energy. We were given clarity on the size and scope of the China stimulus package but there was limited (positive) surprise, leaving markets wanting more.
Market sceptics keep telling us that stock market valuations are too high and a meaningful correction is imminent, but these calls are currently falling on deaf errors. Even important pockets of the lagging ASX, like the banking sector, have repeatedly been described as too expensive and a sell by most analysts.
China’s much anticipated release of further stimulus has underwhelmed, or at least it hasn’t delivered a positive surprise. The package worth 6 trillion yuan ($US1.26 trillion) + another 4 trillion yuan in a special bond facility is designed to help China’s leveraged local governments restructure their finances. In simple, terms, the centralised Government is backstopping local Governments so they can be more pro-growth in their decisions rather than worrying about big piles of debt. The amount and structure of the vehicle was largely well known, and while we finally got a number to attach to it, it was very much aligned with what had been leaked i.e. no great positive shock.
A strong start for the ASX, buoyed by a solid run in Commodity markets overnight saw the market up over 90pts early on before tapering off somewhat as the day progressed.
The ASX200 advanced +0.3% on Thursday, in a very different session from the one enjoyed by US equities following Trump’s victory. Less than 55% of the local mainboard and 5 of the major 11 sectors closed in positive territory.
An intriguing session today with our first crack at digesting what a Trump Presidency could mean locally. The overwhelming takeaway being higher interest rates are a negative for property & infrastructure, a stronger $US will hinder Gold & related equities which were hit , US earners should benefit and found some love, industrial commodities were okay given a better global growth outlook partially offsetting the headwind of a stronger greenback while the “drill baby drill” beneficiaries in mining services also found support.
We are making two changes to the Active Growth Portfolio Today
The bookies again proved to be a far better gauge of politics than the polls, with Donald Trump steamrolling Kamala Harris in yesterday’s election. We all know the result: the Republicans are poised to control the House and Senate, making Trump one of the most powerful Presidents in history, a far cry from a jail cell.
US equity futures rallied, bonds yields traded materially higher (US 10’s +18bps), the $US Dollar Index up +1.4%, the AUD down the same amount & Bitcoin +8% all indicate that Trump is now a very short Favourite to win a 2nd term in office.
Melbourne Cup Day saw the RBA leave interest rates at 4.35% while indicating they will remain at their 13-year high for some time. This is not ideal for Prime Minister Albanese, as a federal election is due between February and May. Labour has already started looking for votes from the younger generation by targeting fees/payments around further education.
