Archives: Reports
A surging copper price and the market belief that the industrial metal will be in short supply in the years ahead as we move towards a carbon-neutral world were the catalysts for BHP’s purchase of OZ Minerals (OZL) last year and bid for Anglo-American (AAL LN) last month. In our opinion, there’s plenty more corporate activity likely in the copper space over the coming years, with the industrial metal remaining a core bullish view for MM. As we’ve said from the start, we would find it highly unlikely that BHP would approach this transaction with a one and done mentality and a second or even third bid would be likely. The AFR is running with a story this morning that both Argo Investments and Wilson Asset Management have said they are satisfied that value would be created by combining BHP and Anglo American’s copper and coal assets, this sort of PR can often be used as a way of preparing or softening the market for when the higher bid does come, which we think is inevitable.
A strong start to the 2nd week of May as softer US employment data on Friday allayed some concerns around sticky inflation and higher interest rates. As bond yields pulled back, equities got some clear air to rally buoyed by US quarterly earnings that are coming in stronger than expected. i.e. the Goldilocks scenario remains in play.
Following recent robust economic data and apparent evidence inflation is becoming increasingly sticky after its steep decline from around 8% in late 2022 to 3.6% today, analysts are split on the future path for interest rates through 2024/5. Most pundits are looking for no change after Tuesday’s 2-day meeting, but the futures market is pricing a good chance of a hike by September – we believe the RBA will adopt a patient stance, but we acknowledge there is far more chance of a hike than a cut over the coming months.
The ASX200 edged +0.7% higher last week as easing bond concerns saw the rate-sensitive stocks/sectors recover strongly. However, some of April’s best-performing areas of the market encountered some profit-taking. For example, the Real Estate +3.2%, Tech +2.3%, and Consumer Discretionary +2.1% sectors advanced strongly, whereas the Materials Sector slipped -0.3%
A solid session to end a choppy but overall positive week for stocks with some big moves playing out across the market. The rate-sensitive sectors in Real-Estate & Property were the main winners for the week showing strong reversion from last week’s move. This ongoing uncertainty around interest rates is clearly having a big influence, however, if MM is correct, the next move in rates will be down which will be supportive of equities overall, hence we’ve maintained our bullish bias towards stocks.
Following NAB’s solid result yesterday, we’ve looked at the Diversified Financials this morning to evaluate if any opportunities are presenting themselves in the current volatile market. This is one sector of the ASX where the saying “not all boats float as one” has been very accurate, the below list of performance through 2024 demonstrates the point perfectly:
Winners: Netwealth (NWL) +28%, AMP (AMP) +15%, Pinnacle (PNI) +14%, HUB24 (HUB) +9%, and Insignia Financial (IFL) +3%.
Losers: Block Inc (SQ2) -9%, Perpetual (PPT) -8%, Magellan (MFG) -6%, Helia (HLI) -6%, and Soul Patts (SOL) -3%.
An interesting session today coming off a volatile last hour in the US where markets surged higher and then gave back all of their gains following the Fed Decision on interest rates. Traders were looking for a big move either way, so derivatives had been piled on, the most in around a year, however, Jerome Powell ‘threaded the needle’ and did a good job of articulating the Fed stance, which is rates may remain higher for longer, but they’re unlikely to go up. The ASX opened marginally higher this morning, rallied then pulled back late as US Futures made gains during our time zone.
As equities have struggled over recent weeks, we’ve been asked several times whether this was a good time to allocate additional capital into the market, hopefully through Market Matters Invest, i.e. the portfolios we manage that are open for investment. While we provide general advice only and do not take into consideration any individual investors personal circumstances, we are still bullish towards equities over the medium term primarily because we see interest rate cuts unfolding over the next 12-18 months, a very bullish backdrop for stocks. We believe that active management can deliver strong risk-adjusted returns for investors, and our track record supports this claim.
The local market wasn’t immune to the equity rout in the US overnight, all sectors closing lower today to give back all the gains that started this week. There was some effort to support the ASX intraday, staging a ~40pt rally from early lows to early afternoon, however, the risk-off trend picked back up into the afternoon as trades took exposure off ahead of the Fed interest rate decision due out tomorrow morning our time.
The infamous May is upon us, although, as we’ve pointed out recently, the ASX200 has rallied through 6 out of the last 10 Mays, delivering investors an average small net gain. Subscribers who like to watch the market seasonality closely should be far more concerned by August and September; the average loss over these 2-months over the last decade is 3.84%. At this stage, we remain net bullish towards the ASX, especially when we reference the highly correlated Canadian TSX and UK FTSE indices, with the latter again notching new highs early in last night’s session. However, two of the market’s recent strong characteristics continue to prevail, and they need to be understood to add alpha (performance) to portfolios.
