Gold stocks have disappointed investors over the last forty-eight hours, with Barrick Gold (GOLD US) and Evolution (EVN) delivering poor production numbers, pushing up unit costs, which unfortunately has been a consistent thematic over recent years. The issues with some of the heavyweight gold stocks have been painfully reflected by their share prices; even as gold tests its all-time high, both GOLD & EVN have more than halved from their post-COVID high – good job, gold hasn’t fallen! MM has been overweight gold through 2023, which has delivered a reasonable return but nothing like our positioning in uranium stocks, illustrating that picking the macro picture is just one part of the puzzle.
The ASX200 fell over -1% on Tuesday, with broad-based selling washing through the market as US S&P500 Futures declined throughout our session – they seemed to get a sniff of what was to come overnight. This year’s news flow is set to be dominated by the US election, and Trump's storming victory in Iowa cemented him as the likely candidate to poll against Biden come November – at this stage, Trump is already a solid favourite with the bookmakers to take his second term in the White House. Hence, in a similar fashion to the Christmas Rally, it's prudent for investors to be aware of the market's usual performance in an election year.
It was interesting to read in the last few days that car rental company Hertz was going to sell 30% of its US electric vehicles (EV), citing higher repair costs and diminishing demand for EVs – they are buying back the dreaded petrol vehicles! The rental giant hasn’t necessarily been a leading light over the last few years, with its shares falling in a bullish market. However, with increasing lithium supply, the commodity doesn’t want to encounter reduced demand for EVs or at least slower growth than is being priced in by markets. To put things into perspective, Hertz bought 100,000 Teslas in 2021, but the US isn’t buying into the EV story and the US accounts for well over 10% of the global car market.
The ASX200 has chopped around in early January, it’s still within striking distance of its 7632 all-time high, with the Index sitting down -1.2%, but if we included dividends, the ASX Total Return Index surged to new record highs in December. The US S&P500 is up +0.3% year-to-date, testing its all-time high with declining bond yields supporting the heavyweight Tech Sector, which has already posted fresh all-time highs even with Apple Inc (AAPL US) struggling. Bond yields continue to control markets and, most importantly, stock & sector rotation as investors second guess the future steps of major central banks.
As was the case yesterday, the focus of this morning’s report is looking at levels to reduce market exposure for the Active Growth Portfolio. Note we are cautiously bullish on a number of the positions simply because we believe the current market advance is maturing into January.
As the ASX200 Accumulation Index (including dividends) pushes to new all-time highs, MM is looking for areas to de-risk slightly after being fully invested through November and December. Today, we have briefly focused on ten stocks in alphabetical order, reiterating if/where we are considering moves, although obviously if we do press the defensive button, it's unlikely we will sell all/part of more than 2/3 positions within the portfolio.
The local market is still in the shadows of the major US indices when it comes to registering new all-time highs, but it has definitely been “on song” over the last few weeks; the ASX200 has already advanced +10.2% for November & December combined with a few exciting sessions remaining. However, as stocks continue to follow our roadmap into 2024, one characteristic which looks set to persist into 2024 is the strong getting stronger & weak weaker.
Monday saw cement business ABC receive a takeover bid from the largest shareholder, Victorias Barro family (~43%) and NY-listed Irish building giant CRH. The $2.1mn buyout proposal offered more hope to the long-suffering shareholders in one fell swoop than the board achieved over the last five years. The proposal at $3.20 saw the stock pop over 30%, although it still closed ~7% below the bid due to the ongoing risks associated with the approach.
Equities accelerated higher last week after the US Fed left interest rates unchanged and, more importantly, they pivoted towards rate cuts in 2024—the sharp U-turn by Jerome Powell et al. changed the investment landscape moving forward from a matter of when not if the Fed would cut rates next year. The dramatic dovish change after the 3rd FOMC meeting, which left rates unchanged, saw Bank of America pencil in a 90% chance of a cut by March while the Fed members clearly expect to be active next year.
This week’s recent dovish tilt by the Fed has made us tweak our already bullish outlook higher; now, we wouldn’t be surprised to see the ASX200 make new all-time highs in 1Q of 2024 - Never say never! Ever since the GFC over 15 years ago, the ASX200 has been trending upwards with a few 15-20% corrections along the journey. Interest rates have been the main driver of valuations and sentiment during this time. We see no reason for this to change, i.e. stocks are in a sweet spot after the Fed's comments on Wednesday night, but as the previous German Bund chart illustrated, we are already well into the pullback in yields MM has been flagging over the last few months.
The ASX200 fell over -1% on Tuesday, with broad-based selling washing through the market as US S&P500 Futures declined throughout our session – they seemed to get a sniff of what was to come overnight. This year’s news flow is set to be dominated by the US election, and Trump's storming victory in Iowa cemented him as the likely candidate to poll against Biden come November – at this stage, Trump is already a solid favourite with the bookmakers to take his second term in the White House. Hence, in a similar fashion to the Christmas Rally, it's prudent for investors to be aware of the market's usual performance in an election year.
It was interesting to read in the last few days that car rental company Hertz was going to sell 30% of its US electric vehicles (EV), citing higher repair costs and diminishing demand for EVs – they are buying back the dreaded petrol vehicles! The rental giant hasn’t necessarily been a leading light over the last few years, with its shares falling in a bullish market. However, with increasing lithium supply, the commodity doesn’t want to encounter reduced demand for EVs or at least slower growth than is being priced in by markets. To put things into perspective, Hertz bought 100,000 Teslas in 2021, but the US isn’t buying into the EV story and the US accounts for well over 10% of the global car market.
The ASX200 has chopped around in early January, it’s still within striking distance of its 7632 all-time high, with the Index sitting down -1.2%, but if we included dividends, the ASX Total Return Index surged to new record highs in December. The US S&P500 is up +0.3% year-to-date, testing its all-time high with declining bond yields supporting the heavyweight Tech Sector, which has already posted fresh all-time highs even with Apple Inc (AAPL US) struggling. Bond yields continue to control markets and, most importantly, stock & sector rotation as investors second guess the future steps of major central banks.
As was the case yesterday, the focus of this morning’s report is looking at levels to reduce market exposure for the Active Growth Portfolio. Note we are cautiously bullish on a number of the positions simply because we believe the current market advance is maturing into January.
As the ASX200 Accumulation Index (including dividends) pushes to new all-time highs, MM is looking for areas to de-risk slightly after being fully invested through November and December. Today, we have briefly focused on ten stocks in alphabetical order, reiterating if/where we are considering moves, although obviously if we do press the defensive button, it's unlikely we will sell all/part of more than 2/3 positions within the portfolio.
The local market is still in the shadows of the major US indices when it comes to registering new all-time highs, but it has definitely been “on song” over the last few weeks; the ASX200 has already advanced +10.2% for November & December combined with a few exciting sessions remaining. However, as stocks continue to follow our roadmap into 2024, one characteristic which looks set to persist into 2024 is the strong getting stronger & weak weaker.
Monday saw cement business ABC receive a takeover bid from the largest shareholder, Victorias Barro family (~43%) and NY-listed Irish building giant CRH. The $2.1mn buyout proposal offered more hope to the long-suffering shareholders in one fell swoop than the board achieved over the last five years. The proposal at $3.20 saw the stock pop over 30%, although it still closed ~7% below the bid due to the ongoing risks associated with the approach.
Equities accelerated higher last week after the US Fed left interest rates unchanged and, more importantly, they pivoted towards rate cuts in 2024—the sharp U-turn by Jerome Powell et al. changed the investment landscape moving forward from a matter of when not if the Fed would cut rates next year. The dramatic dovish change after the 3rd FOMC meeting, which left rates unchanged, saw Bank of America pencil in a 90% chance of a cut by March while the Fed members clearly expect to be active next year.
This week’s recent dovish tilt by the Fed has made us tweak our already bullish outlook higher; now, we wouldn’t be surprised to see the ASX200 make new all-time highs in 1Q of 2024 - Never say never! Ever since the GFC over 15 years ago, the ASX200 has been trending upwards with a few 15-20% corrections along the journey. Interest rates have been the main driver of valuations and sentiment during this time. We see no reason for this to change, i.e. stocks are in a sweet spot after the Fed's comments on Wednesday night, but as the previous German Bund chart illustrated, we are already well into the pullback in yields MM has been flagging over the last few months.
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