This morning, AEST, the Fed cut interest rates by an outsized 0.5%, leading to an initial 375-point surge by the Dow, which subsequently reversed, leaving the old index down over 100 points. Traders initially embraced the large rate cut, though it did raise concerns that the Fed was trying to get ahead of potential economic weakness. We should remember that credit markets were already pricing a 65% chance of such an aggressive move. Comments from the Fed focused on inflation first and foremost, but they are conscious of a slowing economy:
• “The Committee has gained greater confidence that inflation is moving sustainably toward 2%, and judges that the risks to achieving its employment and inflation goals are roughly in balance,”
The Fed are comfortable that inflation is under control, and in the ensuing press conference, Jerome Powell was balanced around the economy: “I don’t see anything in the economy right now that suggests that the likelihood ... of a downturn is elevated,” said Powell. However, stocks faltered as they got their anticipated sugar hit, but latched onto commentary that implied we shouldn’t get used to this size of cut.
The Active Growth Portfolio advanced 2.9% last week, including dividends, outperforming the ASX200, which gained 2.3%. We enjoyed solid gains by Mineral Resources (MIN) +24.9%, Evolution Mining (EVN) +14%, South32 (S32) +8%, Magellan (MFG) +7.6% and BHP Group (BHP) +6.4% while Worley (WOR) -2.3%, Treasury Wines (TWE) -2%, and CSL Ltd (CSL) -1.8% reined in the outperformance.
Many subscribers may be surprised to learn that gold outperformed US stocks in 2024. In US dollars, year-to-date, gold has surged +25% while the S&P500 is up +18%—not too shabby by either! The prospect of declining interest rates has been a major driving force for both markets, with gold also enjoying strong buying out of China as the Yuan and property prices fell. However, markets never go up in straight lines forever, and we are conscious that “a rest” could be constructive for gold moving into 2025, i.e. similar to the pullback in mid-2023.
Official data released on Saturday showed that China's new home prices fell at their fastest pace in more than nine years in August, with economic stimulus failing to deliver a meaningful recovery in the country's property sector. New home prices fell 5.3% YoY, the fastest pace since May 2015, compared with a 4.9% slide in July. In monthly terms, new home prices fell for the 14th straight month, down 0.7%, matching a dip in July. Much to Beijing’s chagrin, China's property market continues to struggle with heavily indebted developers, unfinished apartments, and declining buyer confidence, weighing on the overall financial system and endangering the year's 5% economic growth target.
Many investors expected the US Presidential debate to be the focus this week, but Vladamir Putin stole the thunder from Harris and Trump. The Russian President is considering restrictions on uranium, titanium, and nickel exports - he is playing a tough “game of chicken” because Russia needs the money but is keen to limit sanctions by the West due to the war with Ukraine.
Overseas stocks experienced a mixed night, and European indices delivered varied performances. The EURO STOXX 50 advanced 0.3%, while the FTSE fell -0.15%. The US market delivered an impressive turnaround after initially plunging on a higher-than-expected inflation print - US August CPI +0.3% MoM versus 0.2% expected. Stocks initially tumbled after the CPI but investors chased shares of mega-cap tech and semiconductor names in afternoon trading with heavyweight Nvidia (NVDA US) closing up +8.2%.
A weak session for the US banks, not something we’ve seen on the local bourse this year, dragged the Dow lower overnight but not in any meaningful manner. The American banking sector has been consolidating its strong advance from its 2023 low around current levels for the last six months, albeit in a volatile manner. Following the comments from JPM, a re-test of the August lows wouldn’t surprise; around 8% lower. This is not a great read-through for the ASX banks, which are trading at multi-year highs.
A quick chemistry lesson: The rare earth elements (REE) are seventeen metallic elements, which are categorised into Light Rare Earths (lanthanum to samarium) and Heavy Rare Earths (europium to lutetium). Rare-earth elements (REE) are necessary for more than 200 products across various applications, especially high-tech consumer products, such as mobile phones, computer hard drives, electric and hybrid vehicles, flat-screen monitors and televisions. The REE market is valued at $US6.0 bn in 2024 and is projected to increase to $US10.9 bn by 2029.
US stocks were hit on Friday night after a weak Jobs Report increased fears that the Fed is behind the curve with interest rate cuts. This leads to an increased chance of their economy slipping into a recession, as opposed to the “Goldilocks Scenario,” which investors have embraced through most of 2024. It reminds us of going back to school and the dreaded Calculus, particularly a sinusoidal wave with the top being the “Goldilocks Scenario” and the bottom a recession. US equities have been ignoring several leading indicators over recent months, but the bears came home to roost on Friday night.
The local Financials index looks great at first glance, but it contains the “Big Four” banks, which have been charging ahead since late 2023. When we look under the hood of the diversified financials, it’s been a mixed year for the sector, which was exemplified by the 11% drop by Challenger (CGF) yesterday following Apollo's $530mn sell-down. In general, traditional fund managers have struggled while insurers and more new-age stocks have rallied. This morning, we’ve looked at three of our top picks as we consider what/where to increase exposure to the space into a period of market weakness.
The Active Growth Portfolio advanced 2.9% last week, including dividends, outperforming the ASX200, which gained 2.3%. We enjoyed solid gains by Mineral Resources (MIN) +24.9%, Evolution Mining (EVN) +14%, South32 (S32) +8%, Magellan (MFG) +7.6% and BHP Group (BHP) +6.4% while Worley (WOR) -2.3%, Treasury Wines (TWE) -2%, and CSL Ltd (CSL) -1.8% reined in the outperformance.
Many subscribers may be surprised to learn that gold outperformed US stocks in 2024. In US dollars, year-to-date, gold has surged +25% while the S&P500 is up +18%—not too shabby by either! The prospect of declining interest rates has been a major driving force for both markets, with gold also enjoying strong buying out of China as the Yuan and property prices fell. However, markets never go up in straight lines forever, and we are conscious that “a rest” could be constructive for gold moving into 2025, i.e. similar to the pullback in mid-2023.
Official data released on Saturday showed that China's new home prices fell at their fastest pace in more than nine years in August, with economic stimulus failing to deliver a meaningful recovery in the country's property sector. New home prices fell 5.3% YoY, the fastest pace since May 2015, compared with a 4.9% slide in July. In monthly terms, new home prices fell for the 14th straight month, down 0.7%, matching a dip in July. Much to Beijing’s chagrin, China's property market continues to struggle with heavily indebted developers, unfinished apartments, and declining buyer confidence, weighing on the overall financial system and endangering the year's 5% economic growth target.
Many investors expected the US Presidential debate to be the focus this week, but Vladamir Putin stole the thunder from Harris and Trump. The Russian President is considering restrictions on uranium, titanium, and nickel exports - he is playing a tough “game of chicken” because Russia needs the money but is keen to limit sanctions by the West due to the war with Ukraine.
Overseas stocks experienced a mixed night, and European indices delivered varied performances. The EURO STOXX 50 advanced 0.3%, while the FTSE fell -0.15%. The US market delivered an impressive turnaround after initially plunging on a higher-than-expected inflation print - US August CPI +0.3% MoM versus 0.2% expected. Stocks initially tumbled after the CPI but investors chased shares of mega-cap tech and semiconductor names in afternoon trading with heavyweight Nvidia (NVDA US) closing up +8.2%.
A weak session for the US banks, not something we’ve seen on the local bourse this year, dragged the Dow lower overnight but not in any meaningful manner. The American banking sector has been consolidating its strong advance from its 2023 low around current levels for the last six months, albeit in a volatile manner. Following the comments from JPM, a re-test of the August lows wouldn’t surprise; around 8% lower. This is not a great read-through for the ASX banks, which are trading at multi-year highs.
A quick chemistry lesson: The rare earth elements (REE) are seventeen metallic elements, which are categorised into Light Rare Earths (lanthanum to samarium) and Heavy Rare Earths (europium to lutetium). Rare-earth elements (REE) are necessary for more than 200 products across various applications, especially high-tech consumer products, such as mobile phones, computer hard drives, electric and hybrid vehicles, flat-screen monitors and televisions. The REE market is valued at $US6.0 bn in 2024 and is projected to increase to $US10.9 bn by 2029.
US stocks were hit on Friday night after a weak Jobs Report increased fears that the Fed is behind the curve with interest rate cuts. This leads to an increased chance of their economy slipping into a recession, as opposed to the “Goldilocks Scenario,” which investors have embraced through most of 2024. It reminds us of going back to school and the dreaded Calculus, particularly a sinusoidal wave with the top being the “Goldilocks Scenario” and the bottom a recession. US equities have been ignoring several leading indicators over recent months, but the bears came home to roost on Friday night.
The local Financials index looks great at first glance, but it contains the “Big Four” banks, which have been charging ahead since late 2023. When we look under the hood of the diversified financials, it’s been a mixed year for the sector, which was exemplified by the 11% drop by Challenger (CGF) yesterday following Apollo's $530mn sell-down. In general, traditional fund managers have struggled while insurers and more new-age stocks have rallied. This morning, we’ve looked at three of our top picks as we consider what/where to increase exposure to the space into a period of market weakness.
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