The US Tech Sector surged to fresh all-time highs overnight, led by a 5.2% surge by Nvidia (NVDA US), the shining light. At the close, the $US3 trillion dollar AI behemoth had a larger market cap than Apple Inc (AAPL US), illustrating perfectly how things change in this rapidly evolving sector. The so-called “Magnificent Seven” should really be the “Super Six”, with Tesla (TSLA US) down 30% year-to-date, having themselves evolved and performed very differently over the last year, hence our consideration of where MM should be invested across the influential space.
Weakness across European indices has started to weigh on global markets ahead of this week's European Central Bank (ECB) interest rate decision. The ECB is expected to cut interest rates by 25 basis points this Thursday, reducing the main refinancing rate to 4.25%, the marginal lending rate to 4.50%, and the deposit rate to 3.75%. This will be the first cut in many years although Lagarde may have started to wish she hadn’t been so clear with her messaging for a cut in June. The question being asked is what comes next after this historic pivot.
Solar stocks have roared back into favour this year as the world searches for carbon-neutral energy alternatives. Overnight, we saw Goldman Sachs raise its price target for First Solar (FSLR US), a stock we’ve held since mid-2023. The US powerhouse cited tailwinds from tariffs and data centre demand looming on the horizon, providing further room for the stock to run even after its 80% surge over the past two months - “We remain bullish on the outlook for FSLR and believe several tailwinds could support higher [average selling prices] or potential capacity expansion."
Uranium, the fuel used for nuclear fission, has sprung to the forefront of investor conversation over recent years, sparked by a mammoth 300% appreciation, which began back in 2021. As would be expected, the related stocks have surged accordingly. Interestingly, so far in 2024, when uranium (chemical symbol U) has corrected over 10%, most of the related stocks have kept going. For example, year-to-date Paladin (PDN) is +62%, and Boss Energy (BOE), the “poorer” cousin, is +16%, pretty good returns when the ASX200 is up less than 2%.
The Consumer Staples Sector has been very weak on the ASX, significantly underperforming the US equivalent. Unfortunately, there are many “like for like” examples of local stocks delivering dismal returns compared to their US peers. There are a number of obvious reasons behind the recent pullback in the local sector, including wage pressure and a Senate inquiry into supermarket competition and prices. The final report is due to be provided no later than 28 February 2025, i.e. plenty of uncertainty through 2024. We love an inquiry in Australia; we cannot imagine Trump et al. starting many in the US, which by definition helps corporate America.
Bonds have been driving stocks in 2024, and markets continue to look for rate cuts moving forward. The futures market has pushed back the timing of these well into 2025, while the risks of another hike this year have even crept back into the current pricing. However, a quick glance at the RBA Cash rate since the new millennium shows that after periods of major interest rate adjustment, we often see prolonged periods of no change, i.e. many, many months with a cash rate of 4.35% would not surprise. If today's AFR story is on point and we won't see rate cuts until next Christmas, the valuation of some areas of the ASX200 does feel rich.
The questions ran hot yesterday around Boss Energy (BOE), even after we touched on the leading ASX uranium stocks on Tuesday following the news that the company CEO had sold over 70% of his shares in the uranium miner. Also, for good measure, the Chairman and another director also sold smaller parcels of stock. We can see the logic in taking some $$ off the table after the stock/sector's great run in recent years, but all things being equal, they clearly don’t believe it's going to double again anytime soon.
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!
Weakness across European indices has started to weigh on global markets ahead of this week's European Central Bank (ECB) interest rate decision. The ECB is expected to cut interest rates by 25 basis points this Thursday, reducing the main refinancing rate to 4.25%, the marginal lending rate to 4.50%, and the deposit rate to 3.75%. This will be the first cut in many years although Lagarde may have started to wish she hadn’t been so clear with her messaging for a cut in June. The question being asked is what comes next after this historic pivot.
Solar stocks have roared back into favour this year as the world searches for carbon-neutral energy alternatives. Overnight, we saw Goldman Sachs raise its price target for First Solar (FSLR US), a stock we’ve held since mid-2023. The US powerhouse cited tailwinds from tariffs and data centre demand looming on the horizon, providing further room for the stock to run even after its 80% surge over the past two months - “We remain bullish on the outlook for FSLR and believe several tailwinds could support higher [average selling prices] or potential capacity expansion."
Uranium, the fuel used for nuclear fission, has sprung to the forefront of investor conversation over recent years, sparked by a mammoth 300% appreciation, which began back in 2021. As would be expected, the related stocks have surged accordingly. Interestingly, so far in 2024, when uranium (chemical symbol U) has corrected over 10%, most of the related stocks have kept going. For example, year-to-date Paladin (PDN) is +62%, and Boss Energy (BOE), the “poorer” cousin, is +16%, pretty good returns when the ASX200 is up less than 2%.
The Consumer Staples Sector has been very weak on the ASX, significantly underperforming the US equivalent. Unfortunately, there are many “like for like” examples of local stocks delivering dismal returns compared to their US peers. There are a number of obvious reasons behind the recent pullback in the local sector, including wage pressure and a Senate inquiry into supermarket competition and prices. The final report is due to be provided no later than 28 February 2025, i.e. plenty of uncertainty through 2024. We love an inquiry in Australia; we cannot imagine Trump et al. starting many in the US, which by definition helps corporate America.
Bonds have been driving stocks in 2024, and markets continue to look for rate cuts moving forward. The futures market has pushed back the timing of these well into 2025, while the risks of another hike this year have even crept back into the current pricing. However, a quick glance at the RBA Cash rate since the new millennium shows that after periods of major interest rate adjustment, we often see prolonged periods of no change, i.e. many, many months with a cash rate of 4.35% would not surprise. If today's AFR story is on point and we won't see rate cuts until next Christmas, the valuation of some areas of the ASX200 does feel rich.
The questions ran hot yesterday around Boss Energy (BOE), even after we touched on the leading ASX uranium stocks on Tuesday following the news that the company CEO had sold over 70% of his shares in the uranium miner. Also, for good measure, the Chairman and another director also sold smaller parcels of stock. We can see the logic in taking some $$ off the table after the stock/sector's great run in recent years, but all things being equal, they clearly don’t believe it's going to double again anytime soon.
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!
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