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The ASX200 market slipped lower throughout the shortened week, finally closing down -2%, after showing so much promise going into the long weekend. With the likes of BHP Group (BHP), RIO Tinto (RIO), Sandfire Resources (SFR) and South32 (S32) all making fresh multi-week lows, it was always going to be a tough ask for the resources-laden ASX200 to advance. Conversely, the less influential Tech Sector fared much better, with most major names advancing in unison with the US NASDAQ, which posted fresh all-time highs in most sessions over the 5-days.
A soggy way to end a choppy week for the ASX with the market trading in a relatively tight ~30 point trading range. An eclectic mix of performers today with around 65% of the ASX 200 trading lower, though some of the recently depressed names saw some bargain hunting.
A whopping 9% of the ASX200 is up over 30% so far in 2024, although a lot of better-known “high flyers” didn’t make the cut with such a high bar. Surprisingly, after moves on the sector level, there were still plenty of miners in the winner’s enclosure driven by stock specific influences – which is true across the list below. While the Macro is important, and we place a lot of emphasis on it, stock picking is where the rubber hits the road.
A positive yet unconvincing session locally with the ASX easing off throughout the day, with weakness in Energy & Materials partially offsetting strength in IT, Healthcare & Property.
We all know that 2024 has delivered a noticeably differing performance on the sector level so far, and this particular elastic band is likely to be stretched further this morning. The Tech Sector has outperformed the Materials by a whopping 35%. After moves overnight and renewed Chinese economic jitters, we could easily see it reach 40% this FY. Under the hood, the markets delivered even greater divergence of performance, with 5% of ASX200 stocks down 30% or more. Over the same period, the markets rallied ~1.6% before dividends, not a huge gain but still on the correct side of the ledger. This is a great example that avoiding losers is every bit as important as picking winners; one of the reasons MM Active Growth Portfolio is enjoying another solid year is that we’ve avoided 9 of the 10 names altogether while only enduring part of Corporate Travel’s (CTD) -33% decline so far this year.
Another session where commodities weighed on the ASX, although some tentative buying in some parts of the market had the index finish ~20 points above session lows. US inflation data is due out tonight, expecting +3.4% YoY followed closely by the Federal Reserve’s decision on interest rates (no change tipped) – we should hopefully get some clearer air to end the week.
We are making changes to the Growth Portfolio.
We are less than halfway into June, and Europe has already elevated volatility across equity markets following a rate cut by the ECB and looming elections in the UK and France, where, in both cases, the incumbent party is in real danger of being ousted. There is an old saying that when the Dow sneezes, the ASX catches a cold; however, in the current market environment, the ASX is far more correlated to European stocks on a day-to-day basis, although, unfortunately, we have been underperforming both regions so far this year.
Equities were put under significant pressure with the market suffering its worst day since April as political risks and higher bond yields following the strong US Jobs data last week weighed on risk assets. The Materials sector was the main culprit of the weakness, gold stocks, in particular, taking a beating on the back of the tumble seen by the precious metal on Friday night.
Equity markets hate uncertainty, which was illustrated overnight by French CAC’s initial 2.4% plunge following Macron’s surprise announcement. Our underlying concern is whether stocks can maintain their upside momentum, with political and economic uncertainty increasing almost by the week—perhaps we are set for six months of ongoing stock and sector rotation.
