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The ASX200 was clobbered -1.65% yesterday following savage declines on Wall Street, only the healthcare & gold names caught any semblance of a bid while consumer stocks followed their US peers sharply lower around concerns of rising wages / operating costs. Equities are continuing to adjust to higher inflation and interest rates but we believe it’s now predominantly fears of a potential recession on the horizon that’s become investors’ main focus, as we approach the mid-point of 2022 MM feels we probably need a sniff of slowing inflation before markets can find a meaningful bottom.
The ASX gave back yesterday’s gains today with Real-Estate and IT feeling the pinch, although the influential banks finished higher while pockets of the resources sector also held up well. The worst of the day’s price action was seen at midday before the index edged higher into the close – not a lot happening in US Futures on either side of the ledger.
The ASX200 enjoyed another strong day on Tuesday rallying +0.9%, although over 40% of the main board closed down on the day – it was a stellar performance from the Resources Sector that dragged the index higher e.g. BHP Group (BHP) +4.3%, Fortescue Metals (FMG) +3.8% and South32 (S32) +3.7%. One of the main themes over the last 6-months has been the huge gyrations across the relative stock/sector performances which definitely remains in play today:
Back-to-back strength for the Australian market with the ASX now up 350pts / 5.5% from the recent low ~6400. Energy the standout today as Oil rallied, reports of a price cap for Russian exports the catalyst while the headline in the AFR this afternoon that suggest investors are fleeing the share market for the ‘safety’ of property seems another bullish short-term indicator for equity markets!
The ASX200 enjoyed an explosive start to the week with over 80% of the main board advancing led by the banks, energy and tech stocks, if we take the gold sector out of the mix it was almost a clean sweep for the bulls. There are only 3 trading days left of this financial year hence the easiest call for the next few sessions is we should expect plenty of volatility under the hood of the market, in both directions. Second-guessing which stocks will surge or plunge is akin to a game of two-up hence we would rather step back and see if anything becomes too cheap or expensive and then we can act accordingly i.e. don’t be surprised if you receive another trading alert over the coming week.
A solid start to the week with the ASX putting on nearly 2% led by the financial sector, although it was green right across the screen with all sectors finishing up on the day. Nice to see buying early that was supported throughout the day with the market closing near session highs – some confidence returning, at least in the short term!
Equities are struggling as free money is withdrawn from the financial system and many stocks appear to be going on sale, recession led market corrections have only occurred roughly every 6-years since WW2 and while a little more downside wouldn’t surprise MM considering how much economic stimulus supported stocks through the GFC and COVID these should be exciting times for the informed investors not a time to panic – remember US stocks have already endured over 75% of their average recession led correction.
Last week saw the ASX200 stabilise and following a strong session on Friday even manage to close up +1.6% over the 5-days, an impressive effort considering the Resources Sector tumbled over -4.5% e.g. over the week we saw OZ Minerals (OZL) -5%, BHP Group (BHP) -5.9% and Santos (STO) -7.3%. MM have been talking about the potential for tech and growth stocks to bounce strongly for a while and Friday finally saw such an aggressive “risk on” move unfold as bond yields edge lower on recession fears although at MM we feel the tail end of tax loss selling probably helped release the cork from this particular bottle. Wherever we looked underperforming high beta stocks rallied strongly:
It was certainly a ‘risk on’ session today with the Small Ordinaries (+3.20%) creaming the large caps (+0.77%) while drilling down into the relative sector performances also highlighted that skew, Technology the standout while other interest rate-sensitive sectors like real-estate did well. A good way to end a reasonable week for the market, while at Market Matters we also went live with a new version of our website, which brings in market data, advanced charting, company financials and broker forecasts, into what we think is a very user-friendly platform.
The ASX200 edged higher on Thursday as the broad market managed to successfully offset pockets of aggressive selling in the Resources Sector courtesy of some very tough commentary from Fed Chair Powell around the potential for a recession in the year ahead. The commodities markets have certainly been paying attention with both crude oil and copper plumbing multi-week lows over recent days: