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Morning report

What Matters Today: BHP’s increased bid rejected by Anglo American (AAL LN), now what?

Overnight, we heard that the BHP v Anglo-American story had entered and finished Chapter II, and the saga could potentially have taken its final twist: BHP increased its bid for Anglo-American (AAL LN), which would have given AAL shareholders 16.6% of the new group, up from 14.8%. According to BHP, the revised bid of 0.8132 BHP shares, up from 0.7097, for each AAL share values the London-based miner at £27.53 – a 14.6% increase to bid 1. The second more attractive bid by BHP was rejected by the AAL board overnight. The UK miner now needs to deliver a compelling vision of how it can survive and flourish independently without merging with the “Big Australian.” The synergies were undoubtedly there, although it wasn’t the cleanest deal in town, but AAL don't appear keen to tango. The deal was offered to the AAL board last week and formally rejected overnight.
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what matters today Market Matters
Morning report

Macro Monday: The economic backdrop is starting to improve for the ASX200

April witnessed a bearish move by bonds and equities, driven by escalating interest rate fears as “sticky inflation” became a regularly used catchphrase across financial markets. Conversely, so far in May, we’ve witnessed a complete reversion in the market's thinking/pricing for the future path of interest rates after both the Fed and RBA left rates on hold and delivered less hawkish rhetoric than many feared. Also, for good measure, markets embraced the recent “goldilocks” US employment data, which was a miss on job creation, while monthly wage growth slipped 0.2% from March; the latter was the number that caught most people's attention.
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what matters today Market Matters
Morning report

What Matters Today: The Utilities Sector is starting to shine

The Utilities Sector is not large, making up only 2% of the ASX200 by market cap. However, the sector is up +9.5% in 2024, compared to the ASX200, which has only advanced +1.7%, making it the second best-performing sector behind tech on the main board. With a market concerned about valuations and interest rates poised to fall through 2024/5, defensive plays with solid, reliable yields are likely to maintain their recent solid performance.
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what matters today Market Matters
Morning report

What Matters Today: Should We Avoid Australian Fund Managers after Perpetuals Fail?

For more than a decade, Australian fund managers have leapt from one calamity to the next, creating an absolute minefield for Australian investors. A quick look at the charts of Janus Henderson (JHG), Platinum (PTM), and AMP (AMP) tells a clear, painful tale of wealth destruction. Now Perpetual (PPT) has joined the fray, with its share price basically halving over the last few years against a backdrop of a broader market making new all-time highs.
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what matters today Market Matters
Morning report

Portfolio Positioning: The RBA propels the ASX back towards its all-time high

Earnings undoubtedly drive share prices over the medium/long term, but when it comes to sharp short-term swings in overall market valuations/sentiment, there's nothing like monetary policy to dictate terms for stocks, with the RBA front and centre yesterday. The correlation between the local index and 3-year bonds has been extremely close over the last year, which is the major reason MM keeps a close eye on credit markets. The RBA left interest rates unchanged on Wednesday at 4.35%, while they indicated rates would need to “stay higher for longer” to rein in sticky inflation; importantly, there was little suggestion that rates would again start to rise as many had feared. The main pressure on inflation is coming from the strong jobs market, as well as higher petrol prices, which has a knock-on effect throughout the economy – the latter is frustrating when we consider crude oil has fallen 5% in 2024.
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what matters today Market Matters
Morning report

What Matters Today: Rumours abound that Glencore is now considering a tilt at Anglo American (AAL LN)

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.
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what matters today Market Matters
Morning report

Macro Monday: Will the RBA hike this week?

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.
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Morning report

What Matters Today: Is recent weakness delivering value in the Diversified Financials?

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%.
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Morning report

What Matters Today: Does MM like any defensives into recent weakness?

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.
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what matters today Market Matters
Morning report

Portfolio Positioning: US stocks get hit as we enter May

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.
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MM remains cautiously bullish toward the ASX200
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SEK
MM is now neutral towards SEK, around $23
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LLC
MM has no interest in LLC
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ALL
MM is neutral/cautiously bullish towards ALL around $40
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IVV
MM remains bullish towards US stocks in the medium term
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MM remains bullish towards copper medium-term
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MM is now neutral on AAL around GBP27.00
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BHP
MM remains long and bullish towards BHP
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RIO
MM remains bullish towards RIO
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SFR
MM is long and bullish SFR
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Latest Reports

Morning report

Macro Monday: The economic backdrop is starting to improve for the ASX200

April witnessed a bearish move by bonds and equities, driven by escalating interest rate fears as “sticky inflation” became a regularly used catchphrase across financial markets. Conversely, so far in May, we’ve witnessed a complete reversion in the market's thinking/pricing for the future path of interest rates after both the Fed and RBA left rates on hold and delivered less hawkish rhetoric than many feared. Also, for good measure, markets embraced the recent “goldilocks” US employment data, which was a miss on job creation, while monthly wage growth slipped 0.2% from March; the latter was the number that caught most people's attention.

what matters today Market Matters
Morning report

What Matters Today: The Utilities Sector is starting to shine

The Utilities Sector is not large, making up only 2% of the ASX200 by market cap. However, the sector is up +9.5% in 2024, compared to the ASX200, which has only advanced +1.7%, making it the second best-performing sector behind tech on the main board. With a market concerned about valuations and interest rates poised to fall through 2024/5, defensive plays with solid, reliable yields are likely to maintain their recent solid performance.

what matters today Market Matters
Morning report

What Matters Today: Should We Avoid Australian Fund Managers after Perpetuals Fail?

For more than a decade, Australian fund managers have leapt from one calamity to the next, creating an absolute minefield for Australian investors. A quick look at the charts of Janus Henderson (JHG), Platinum (PTM), and AMP (AMP) tells a clear, painful tale of wealth destruction. Now Perpetual (PPT) has joined the fray, with its share price basically halving over the last few years against a backdrop of a broader market making new all-time highs.

what matters today Market Matters
Morning report

Portfolio Positioning: The RBA propels the ASX back towards its all-time high

Earnings undoubtedly drive share prices over the medium/long term, but when it comes to sharp short-term swings in overall market valuations/sentiment, there's nothing like monetary policy to dictate terms for stocks, with the RBA front and centre yesterday. The correlation between the local index and 3-year bonds has been extremely close over the last year, which is the major reason MM keeps a close eye on credit markets. The RBA left interest rates unchanged on Wednesday at 4.35%, while they indicated rates would need to “stay higher for longer” to rein in sticky inflation; importantly, there was little suggestion that rates would again start to rise as many had feared. The main pressure on inflation is coming from the strong jobs market, as well as higher petrol prices, which has a knock-on effect throughout the economy – the latter is frustrating when we consider crude oil has fallen 5% in 2024.

what matters today Market Matters
Morning report

What Matters Today: Rumours abound that Glencore is now considering a tilt at Anglo American (AAL LN)

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.

what matters today Market Matters
Morning report

Macro Monday: Will the RBA hike this week?

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.

Morning report

What Matters Today: Is recent weakness delivering value in the Diversified Financials?

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%.

what matters today Market Matters
Morning report

What Matters Today: Does MM like any defensives into recent weakness?

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.

what matters today Market Matters
Morning report

Portfolio Positioning: US stocks get hit as we enter May

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.

what matters today Market Matters
more
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