At MM, we adopt a “top-down” meets “bottom-up approach” to investing. In other words, we identify the macro-picture and sectors which should outperform accordingly before boring down into the individual stocks which should benefit the most and pass MMs screening. Importantly, within individual sectors there are many different companies exposed to different drivers, and this is certainly the case in Energy sector where the likes of Thermal Coal, Oil, Gas and Uranium, can all be pulling in different directions at once.
The weakness across the ASX on Thursday and Friday was severe enough to leave MM questioning our short-term bullish outlook for stocks, but this morning, the local index is set to regain its composure and open up +0.6%. Some US indices tested fresh all-time highs on Friday night, an impressive effort following the hawkish Fed Minutes earlier in the week. Credit markets have largely taken a Fed rate cut off the table for September, while two cuts by January are now considered far from certain, yet equities continue to advance.
US stocks endured a tough day at the office overnight, with the Real Estate and Utilities faring the worst after the Fed minutes saw investors reduce bets for rate cuts into 2025. Also, we saw firm economic data, which compounded the nervousness post Fed with Services and Manufacturing data printing strongly. Nvidia (NVDA US) soared after delivering a solid earnings beat, but it wasn’t enough to turn around the concerns arising from the Fed Minutes - note that the stock is to undergo a 10-1 split; hence, it won’t be trading above $US1,000 for long!
Cutting losses defines a portfolio's performance as much as picking winners; hence, this morning, we revisited the 3 stocks in our Active Growth Portfolio that are in the worst shape on paper. Taking a loss is never fun, but it's all part of investing and an area that many seem to struggle with. We’ve gotten better at it over the years and approach the decision with very little emotion, and we hope to pass that ability onto our readers. We run real money portfolio’s published on the Market Matters Website and members can see our recent sales at the bottom of each portfolio going back several years, although there are few we would rather not be reminded of!
The potential ~$64bn takeover of Anglo-American (AAL LN) by BHP has dominated the news in recent weeks, but the clock is ticking, at 5pm London time tonight, the door will close, for now at least. It will come as no great surprise if BHP walks as Anglo’s CEO Duncan Wanblad and the rest of the AAL board appeared to have no interest in discussing a bid – at least at the current price point BHP’s offer was implying. However, there is still a chance that BHP could lob in a “best a final” conservative bid aimed at disgruntled shareholders before the window closes, making BHP a tricky proposition at current levels.
Gold made new all-time highs this week as precious metals continued their advance even when fund managers, according to the recent Bank of America Fund Managers Survey, believe they are the most overvalued since 2020. The recent move was aided by a pullback in bond yields on renewed optimism towards rate cuts and the subsequent weakness in the $US. We are a little torn towards what comes next for gold and its related stocks, although if we were traders, it would be “long or square”, most definitely not short.
China has pulled more stimulus levers over the last few days, and although they are targeted, as was previously flagged by Beijing, it does feel like Xi Jinping has drawn a line in the sand after recent economic data signalled the need for urgent action. The property sector, once an integral driver of economic growth, is still struggling with prices for new homes across 70 cities having declined for the last ten consecutive months after falling 0.6% in April, with property investment down a whopping -9.8% in the 1st four months of 2024 compared to last year. April's fall represents the fastest month-on-month rate of decline in more than nine years, although interestingly, real estate stocks are starting to bounce.
Recent years have witnessed some huge moves in cyclical commodities such as coal, lithium, and copper. Uranium is another one that can be added to the list, although it’s a touch less tangible in Australia. We obviously cannot touch the stuff, and there is no nuclear power on our shores. US President Joe Biden has just signed the bill to ban the import of Russian-sourced enriched uranium into the US. We remain very bullish on the outlook for uranium in the next few years, seeing no hurdles to the upside, although Donald Trump may reverse this particular bill if he wins in November's US election. We could easily see uranium another 50% higher in the coming years.
US short-term bond yields tested multi-week lows overnight following the cooling US CPI, but they are still nowhere near as dovish as they were back in January/February. Last night's numbers were undoubtedly encouraging, but more proof will be required for credit markets and, most importantly, the Fed to conclude that inflation’s contained. Bond markets are often thought to be smarter than equities, as they are significantly larger, and at the moment, they are saying stocks are getting a touch overly optimistic. We believe stocks will ultimately be proved correct, but we must remain cognisant that any deterioration in the interest rate picture could easily see stocks pull back to their April lows.
Overnight, Jim Chalmers delivered his pre-election budget, and not surprisingly, he “splashed the cash.” The government has committed to increasing net spending by over $24bn over the next four years; the Treasurer believes his budget will cut inflation by 0.5% next FY, but financial markets were not convinced. The deficit was forecast to be around $18bn in December; already, 6-months later, the figures jumped by a whopping +55%, while the forecasted 2025 deficit is more than double economists' previous estimates - why bother!
The weakness across the ASX on Thursday and Friday was severe enough to leave MM questioning our short-term bullish outlook for stocks, but this morning, the local index is set to regain its composure and open up +0.6%. Some US indices tested fresh all-time highs on Friday night, an impressive effort following the hawkish Fed Minutes earlier in the week. Credit markets have largely taken a Fed rate cut off the table for September, while two cuts by January are now considered far from certain, yet equities continue to advance.
US stocks endured a tough day at the office overnight, with the Real Estate and Utilities faring the worst after the Fed minutes saw investors reduce bets for rate cuts into 2025. Also, we saw firm economic data, which compounded the nervousness post Fed with Services and Manufacturing data printing strongly. Nvidia (NVDA US) soared after delivering a solid earnings beat, but it wasn’t enough to turn around the concerns arising from the Fed Minutes - note that the stock is to undergo a 10-1 split; hence, it won’t be trading above $US1,000 for long!
Cutting losses defines a portfolio's performance as much as picking winners; hence, this morning, we revisited the 3 stocks in our Active Growth Portfolio that are in the worst shape on paper. Taking a loss is never fun, but it's all part of investing and an area that many seem to struggle with. We’ve gotten better at it over the years and approach the decision with very little emotion, and we hope to pass that ability onto our readers. We run real money portfolio’s published on the Market Matters Website and members can see our recent sales at the bottom of each portfolio going back several years, although there are few we would rather not be reminded of!
The potential ~$64bn takeover of Anglo-American (AAL LN) by BHP has dominated the news in recent weeks, but the clock is ticking, at 5pm London time tonight, the door will close, for now at least. It will come as no great surprise if BHP walks as Anglo’s CEO Duncan Wanblad and the rest of the AAL board appeared to have no interest in discussing a bid – at least at the current price point BHP’s offer was implying. However, there is still a chance that BHP could lob in a “best a final” conservative bid aimed at disgruntled shareholders before the window closes, making BHP a tricky proposition at current levels.
Gold made new all-time highs this week as precious metals continued their advance even when fund managers, according to the recent Bank of America Fund Managers Survey, believe they are the most overvalued since 2020. The recent move was aided by a pullback in bond yields on renewed optimism towards rate cuts and the subsequent weakness in the $US. We are a little torn towards what comes next for gold and its related stocks, although if we were traders, it would be “long or square”, most definitely not short.
China has pulled more stimulus levers over the last few days, and although they are targeted, as was previously flagged by Beijing, it does feel like Xi Jinping has drawn a line in the sand after recent economic data signalled the need for urgent action. The property sector, once an integral driver of economic growth, is still struggling with prices for new homes across 70 cities having declined for the last ten consecutive months after falling 0.6% in April, with property investment down a whopping -9.8% in the 1st four months of 2024 compared to last year. April's fall represents the fastest month-on-month rate of decline in more than nine years, although interestingly, real estate stocks are starting to bounce.
Recent years have witnessed some huge moves in cyclical commodities such as coal, lithium, and copper. Uranium is another one that can be added to the list, although it’s a touch less tangible in Australia. We obviously cannot touch the stuff, and there is no nuclear power on our shores. US President Joe Biden has just signed the bill to ban the import of Russian-sourced enriched uranium into the US. We remain very bullish on the outlook for uranium in the next few years, seeing no hurdles to the upside, although Donald Trump may reverse this particular bill if he wins in November's US election. We could easily see uranium another 50% higher in the coming years.
US short-term bond yields tested multi-week lows overnight following the cooling US CPI, but they are still nowhere near as dovish as they were back in January/February. Last night's numbers were undoubtedly encouraging, but more proof will be required for credit markets and, most importantly, the Fed to conclude that inflation’s contained. Bond markets are often thought to be smarter than equities, as they are significantly larger, and at the moment, they are saying stocks are getting a touch overly optimistic. We believe stocks will ultimately be proved correct, but we must remain cognisant that any deterioration in the interest rate picture could easily see stocks pull back to their April lows.
Overnight, Jim Chalmers delivered his pre-election budget, and not surprisingly, he “splashed the cash.” The government has committed to increasing net spending by over $24bn over the next four years; the Treasurer believes his budget will cut inflation by 0.5% next FY, but financial markets were not convinced. The deficit was forecast to be around $18bn in December; already, 6-months later, the figures jumped by a whopping +55%, while the forecasted 2025 deficit is more than double economists' previous estimates - why bother!
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