These three unrelated commodities have surged higher recently, taking many ASX names along for the ride. For example, in 2024, Sandfire Resources (SFR) is up +24%, Northern Star (NST) +8%, and Paladin (PDN) +50%. Fortunately, at MM, we enjoyed the moves of all three themes, and today, we quickly reviewed the group to evaluate if our exposure needs tweaking as market volatility starts to increase.
We believe the end-of-quarter squeeze into Easter amplified the sharp fall on Wednesday; hence, we looked back at the charts to see if this “Gut Feel” had any foundation. Only twice since COVID have stocks squeezed into the end of the quarter, and the last time was the previous quarter, which subsequently witnessed the ASX200 unravel 260 points in just three weeks. However, any further comparisons are akin to “curve fitting,” with such upside squeezes actually very few and far between.
Tuesday delivered a fascinating session for Australian investors. A macro arm wrestle unfolded, causing significant action under the hood before the index eventually slipped just -0.1 %. This was a solid performance, in our opinion, considering Thursday's storming session to end the quarter. The bulls welcomed a resurgence in China-facing stocks, while interest rate-sensitive names struggled as the doves pulled back bets on a Fed rate cut in June. We're conscious that over recent years, bonds and stocks haven't walked a different path for very long.
Gold popped almost $US50/oz yesterday evening, posting another fresh all-time high in the process as investors/traders further digested last week's market-friendly PCE Index data. The Fed's preferred gauge of inflation is cooling which suggests the Fed is getting ever closer to cutting rates. The precious metal is also enjoying the added tailwind of powerful Chinese demand and ongoing global political tensions, what's not to like? Gold has surged ~12% over the last six weeks, and with no near term end in sight for the three bullish drivers mentioned previously, we can see it testing $US2400-2500 before Christmas.
Healthcare stocks caught our attention on Wednesday after their +1.3% advance. However, they’ve been a clear laggard in 2024, advancing only +2.1%, while four other sectors have delivered double-digit gains. The potential influence of the new wonder weight loss drug, Ozempic et al., has weighed on a couple of influential ASX names, but with interest rate cuts on the horizon, we question if this underperformance will continue. Another bonus from the sector is its label as a defensive play, a comforting addition to most portfolios with global equities pushing to fresh all-time highs.
As the market slips into the Easter long weekend, some profit-taking felt evident on Tuesday, no great surprise considering the index has rallied over 15% from its November low. The afternoon selling wasn’t overly aggressive, but as we touched on yesterday morning, the markets are a touch bullish and long; hence, some book-squaring/selling by the weak longs didn’t encounter any significant resistance. One of the main themes of 2024 to date has been the strong getting stronger and often the weak getting weaker, even as the ASX200 forged to fresh all-time highs. A quick glance at some sectors three months into the year tells the tale: remember, the index is up a healthy +2.5%.
A number of major ASX200 stocks hit fresh recent highs on Monday, led by heavyweight real estate favourite Goodman Group (GMG) – as we’ve discussed in the past, this is one particular holding we are bullish over the medium term and are “happy to let it run” – MM is long GMG in our Active Growth Portfolio. This morning, we deliberately looked at five stocks, not in MM portfolios, but it was pleasing to see Xero (XRO) and Sandfire (SFR) both continuing to deliver and joining GMG in the winner's enclosure – note we already looked at Webjet (WEB) earlier in this mornings report hence didn’t cover again.
The ASX200 enjoyed a solid penultimate week of March, taking solace from the FOMC’s read on interest rates with the Materials, Real Estate and Financials leading the advance, whereas weakness in the Consumer Staples and Utilities Sectors illustrated it was another week of “risk on” for stocks. In line with global equities, especially the European stocks, our preferred scenario is to see a test of the 7900-8000 region over the coming weeks. Still, we are conscious that the seasonally weak “sell in May & go away” period is approaching fast.
The ASX200 rebalances quarterly, which effectively means out with the old (poor performers) and in with the new (strong performers). Stocks need to meet a number of criteria to enter the ASX200, including market cap, liquidity, number of shareholders, and “free float.” This means the index effectively undergoes a quality filter on a regular basis where, unlike investors/traders, it exits stocks which aren’t cutting the proverbial mustard.
The Fed reiterated that it is expecting to cut interest rates three times in 2024, with June the most likely start of the pivot, and as we saw overnight, it is great news for risk assets. However, it might surprise some to see the Real Estate Sector struggle to keep up with its peers overnight, only advancing +0.26% compared to the S&P500, which advanced by +0.9%, and there are no obvious signs that this relative underperformance will change, primarily because the sector has already moved 25% from its late 2023 low – it’s a very similar picture on the ASX where most names remain up in the short term, but are still well below their post-COVID highs.
We believe the end-of-quarter squeeze into Easter amplified the sharp fall on Wednesday; hence, we looked back at the charts to see if this “Gut Feel” had any foundation. Only twice since COVID have stocks squeezed into the end of the quarter, and the last time was the previous quarter, which subsequently witnessed the ASX200 unravel 260 points in just three weeks. However, any further comparisons are akin to “curve fitting,” with such upside squeezes actually very few and far between.
Tuesday delivered a fascinating session for Australian investors. A macro arm wrestle unfolded, causing significant action under the hood before the index eventually slipped just -0.1 %. This was a solid performance, in our opinion, considering Thursday's storming session to end the quarter. The bulls welcomed a resurgence in China-facing stocks, while interest rate-sensitive names struggled as the doves pulled back bets on a Fed rate cut in June. We're conscious that over recent years, bonds and stocks haven't walked a different path for very long.
Gold popped almost $US50/oz yesterday evening, posting another fresh all-time high in the process as investors/traders further digested last week's market-friendly PCE Index data. The Fed's preferred gauge of inflation is cooling which suggests the Fed is getting ever closer to cutting rates. The precious metal is also enjoying the added tailwind of powerful Chinese demand and ongoing global political tensions, what's not to like? Gold has surged ~12% over the last six weeks, and with no near term end in sight for the three bullish drivers mentioned previously, we can see it testing $US2400-2500 before Christmas.
Healthcare stocks caught our attention on Wednesday after their +1.3% advance. However, they’ve been a clear laggard in 2024, advancing only +2.1%, while four other sectors have delivered double-digit gains. The potential influence of the new wonder weight loss drug, Ozempic et al., has weighed on a couple of influential ASX names, but with interest rate cuts on the horizon, we question if this underperformance will continue. Another bonus from the sector is its label as a defensive play, a comforting addition to most portfolios with global equities pushing to fresh all-time highs.
As the market slips into the Easter long weekend, some profit-taking felt evident on Tuesday, no great surprise considering the index has rallied over 15% from its November low. The afternoon selling wasn’t overly aggressive, but as we touched on yesterday morning, the markets are a touch bullish and long; hence, some book-squaring/selling by the weak longs didn’t encounter any significant resistance. One of the main themes of 2024 to date has been the strong getting stronger and often the weak getting weaker, even as the ASX200 forged to fresh all-time highs. A quick glance at some sectors three months into the year tells the tale: remember, the index is up a healthy +2.5%.
A number of major ASX200 stocks hit fresh recent highs on Monday, led by heavyweight real estate favourite Goodman Group (GMG) – as we’ve discussed in the past, this is one particular holding we are bullish over the medium term and are “happy to let it run” – MM is long GMG in our Active Growth Portfolio. This morning, we deliberately looked at five stocks, not in MM portfolios, but it was pleasing to see Xero (XRO) and Sandfire (SFR) both continuing to deliver and joining GMG in the winner's enclosure – note we already looked at Webjet (WEB) earlier in this mornings report hence didn’t cover again.
The ASX200 enjoyed a solid penultimate week of March, taking solace from the FOMC’s read on interest rates with the Materials, Real Estate and Financials leading the advance, whereas weakness in the Consumer Staples and Utilities Sectors illustrated it was another week of “risk on” for stocks. In line with global equities, especially the European stocks, our preferred scenario is to see a test of the 7900-8000 region over the coming weeks. Still, we are conscious that the seasonally weak “sell in May & go away” period is approaching fast.
The ASX200 rebalances quarterly, which effectively means out with the old (poor performers) and in with the new (strong performers). Stocks need to meet a number of criteria to enter the ASX200, including market cap, liquidity, number of shareholders, and “free float.” This means the index effectively undergoes a quality filter on a regular basis where, unlike investors/traders, it exits stocks which aren’t cutting the proverbial mustard.
The Fed reiterated that it is expecting to cut interest rates three times in 2024, with June the most likely start of the pivot, and as we saw overnight, it is great news for risk assets. However, it might surprise some to see the Real Estate Sector struggle to keep up with its peers overnight, only advancing +0.26% compared to the S&P500, which advanced by +0.9%, and there are no obvious signs that this relative underperformance will change, primarily because the sector has already moved 25% from its late 2023 low – it’s a very similar picture on the ASX where most names remain up in the short term, but are still well below their post-COVID highs.
Check your email for an email from [email protected]
Subject: Your OTP for Account Access
This email will have a code you can use as your One Time Password for instant access
Verication email sent.
Check your email for an email from [email protected]
Subject: Your OTP for Account Access
This email will have a code you can use as your One Time Password for instant access
!
Invalid One Time Password
Please check you entered the correct info, please also note there is a 10minute time limit on the One Time Passcode
To reset your password, enter your email address
A link to create a new password will be sent to the email address you have registered to your account.
Market Matters members receive daily market reports, real-time trade alerts, full access to 5 portfolios and dynamic company data.
Choose how you'd like to proceed:
We have a range of membership options to suit your needs and budget, why not join today and get unlimited access to the premium Market Matters service.
