Archives: Reports
Monday saw all 11 sectors close higher, with the “Big Four” banks, BHP Group (BHP) and CSL Ltd (CSL), all adding to the day’s +0.7% advance. However, less than 70% of the main board closed higher, with buying solid rather than euphoric. The only pocket of the Materials index that struggled after the assassination attempt on Former-President Trump was the lithium/ESG names, with the Republican candidate surging ahead of Biden at the Bookies, e.g. Liontown Resources (LTR) -3%, Pilbara (PLS) -1.3% and IGO Ltd (IGO) -1.2%. A Trump victory is good news for oil & gas as opposed to EVs, etc., as he intends to reverse Biden’s climate policies.
The market smashed through 8000 this morning on a clear breakout of its nearly 6-month-long trading range, hitting an early high of 8037, before tapering off into the back end of the session following softer Chinese GDP. All 11 sectors were higher, though most buying was targeted in the large caps with the Small Ords finishing flat.
The 2nd week of July enjoyed a dovish testimony from Jerome Powell and a lower-than-expected US CPI print (inflation), both bullish for equities, but some sectors more than others. We are now looking for bond yields and interest rates to turn lower over the coming year, which should drive some reversion on the stock/sector front. At MM, we constantly evaluate our performance from a service (survey coming this week) and portfolio performance perspective, and the standout factor of the latter is that our outperformance has come from sector and stock tilts i.e. focussing on being in the right sectors & stocks at the right time, rather than picking market direction
The ASX200 finally popped to fresh all-time highs on Friday, and it looks set to deliver another stellar performance for July—we’re less than halfway through, and it’s already up +2.5%. Over 80% of the main board helped lift the index towards the psychological 8000 level, with the rate-sensitive name leading the advance while the resources stocks continued to rein in the gains.
The market broke to new all-time highs today, and held them, underpinned by broad-based strength with 85% of the ASX 200 ending the session higher, though there was an obvious change to market leadership, with property and consumer discretionary i.e. interest rates sensitive sectors leading the line, while small caps outperformed large.
We are making two changes to the growth portfolio today.
Will it be 3rd time lucky for the local market to attempt to break out to fresh all-time highs? We believe the answer is yes, but it certainly feels like it’s now or never, as global equity markets position themselves for lower interest rates without pricing in any meaningful risk of a recession. As for politics, equities are saying who cares if France has an unworkable government and the US is on course for a second term of a Trump Presidency. Investors are focusing on the prospect of declining interest rates while ignoring rising valuations and macro uncertainties percolating beneath the surface. This will change at some time, but for now, it’s a dangerous game fighting the bullish tape, particularly if US earnings season delivers.
The ASX is back-testing highs with a short foray above 7900 this morning before we ticked back below the milestone by the close. Still, it was a very positive session for local stocks, keying off a more broad-based rally in US overnight i.e. it wasn’t just the mega-cap tech stocks that moved, the often neglected US Material sector was No2 for the session driven by strong moves in Uranium shares, while the small caps (Russell 2000) kept pace with the larger caps ahead of quarterly earnings that is expected to show US earnings growth spreading across a more diverse group.
The ASX200 closed down 0.2% on Wednesday but felt like a positive day to MM, with the index rallying from its early morning low to close near its intra-day high – if it weren’t for ongoing weakness by the large-cap iron ore names, it would have been a bullish reversal, e.g. BHP -1.3% and RIO -1%. The market’s internals were okay, with only 52% of the ASX200 closing lower on the day, while the index itself remained above 7800, within 1.2% of its all-time high. As we’ve said a few times of late, all things being equal, the path of least resistance for the index is up, but the resources need to hold at least steady for the ASX200 to test 8000. The underperformance of the influential iron ore names, considering we’re close to all-time highs, is eye-catching:
A weak open this morning saw the ASX down over 50pts at the low, though a consistent recovery for the remainder of the day saw the market only mildly down by the close, an eclectic mix of stocks scattering the leaderboard. What has been consistent is the underperformance of some commodities, going against the improving trends that played out last week, though Gold remains the exception.
