The ASX200 fell another -0.6% on Tuesday, with over 60% of the main board closing lower, the Energy Sector being the lone wolf that managed to close up. The Resources Sector again caught our attention after ongoing measures by Beijing to stem the rout in their equities market helped the Shanghai Composite to rally over +3% following a number of announcements, including the state funds vow to boost stock purchases – a reason to cut any China facing shorts in our opinion.
On December 6th, we held a Webinar “Analysing our seven highest conviction calls”, which we believe has fared pretty well over the last two months, but in today's market, we cannot be complacent, needing to evaluate our positions and views constantly. We strongly recommend subscribers revisit the webinar, which covered the seven stocks and explained some of the Market Matters website's exciting functionality.
Social Media giant Meta Platforms surged after their results beat analysts' expectations, and they announced the company's first-ever quarterly dividend plus a $US50bn share buyback program, i.e. a greater than the entire market cap of Macquarie Group (MQG). Of the “Magnificent Seven,” last week we saw Meta Platforms (META US), NVIDIA (NVDA US), Amazon.com (AMZN US), Alphabet (GOOGL US), and Microsoft (MSFT US) all make fresh all-time highs while Apple Inc (AAPL US) and Tesla (TSLA US) struggled, plus Alphabet (GOOGL US) had reversed lower come Friday, in other words, its become the “Dominant Four”, not traditional broad-based buying but its proving hard to fight the tape at this stage.
The Australian Consumer Staples sector has struggled over recent years, but as MM looks to position portfolios more defensively, it's been on our radar of late, i.e. people have to eat. With interest rates set to fall through 2024/5, inflation under control and supply chain issues in the rearview mirror, the outlook has improved for the sector. The peak cost of living has passed, with spending growth on the horizon, helped by solid immigration, with supermarkets likely to be a key beneficiary.
Overnight saw the Fed hold interest rates steady for the 4th straight meeting while signalling its openness to cut, if not straight away. The Futures markets are now pricing in an implied Fed Funds rate of 3.695% in January 2025, well below today's effective 5.33% rate – we still believe this outlook will prove too dovish as we move through 2024. Jerome Powell shocked many doves when he effectively took a March cut off the table during the press conference, investors need to be patient!
As we look right across the suite of Market Matters Portfolio’s with an eye on increasing their defensive qualities, the Income Portfolio stands out as one that is already set very defensively, both in terms of overall asset allocation (49% in Equities, 37% Bonds & Hybrids, 8% in Property & 6% in Cash), but also in terms of the types of equities held, with a skew towards predictable earnings (some regulated), high yielding, low beta stocks. While this stance will cost us ‘upside’ in a strong market, it will help to smooth returns amid choppier conditions while maintaining strong levels of income, with the portfolio yielding over ~7% inclusive of franking.
Yesterday, China Evergrande Group received a liquidation order from a Hong Kong court, which was no major surprise when we consider the company's share price over recent years. China's property crisis continues to unfold, although a market nadir is often plumbed on headline bad news. The collapse of this previous poster child is by far the largest failure in the world's 2nd largest economy's property market, which has witnessed several defaults by developers, aka a falling pack of cards. In the short term, the move by Judge Linda Chan is likely to see some asset sales in a property market lacking liquidity and confidence; the world will be watching closely.
Reporting season, both locally and in the US, has already started to increase volatility on the stock level, with the majority of companies still to face the music, e.g. winners so far include ResMed (RMD) and Kogan (KGN) & losers Dominos (DMP) and Nanosonics (NAN). However, on the index level, we are still targeting a push to fresh highs by the ASX200, now less than 2% away. It's important to reiterate that MM is looking to migrate down the risk curve into such a move, but we are only looking to tweak portfolios as opposed to adopting an outright bearish stance.
Beijing has announced the PBOC will cut the bank's Reserve Requirement Ratio by 0.5% effective the 5th of February, the announcement sent stocks in Hong Kong surging up over 3.5% in rapid fashion, its largest daily gain in four months. The move is aimed at stimulating the economy by relaxing lending restrictions as the banks aren’t required to hold as much cash in reserve, a significant move which frees up about $US140bn. As we know, Beijing is also likely to put “pressure” on the banks to put this money to work, which should help their goal of kick-starting the economy.
The local index triggered a buy signal for MM on Monday when it traded back above 7460, with our ideal target being the 7650-7700 area, suggesting further “risk on” is the order of the day into February. However, it's important to reiterate that while MM is bullish over the coming weeks, we continue to believe the strong advance from late October is maturing, and we intend to migrate portfolios down the risk curve into further strength.
On December 6th, we held a Webinar “Analysing our seven highest conviction calls”, which we believe has fared pretty well over the last two months, but in today's market, we cannot be complacent, needing to evaluate our positions and views constantly. We strongly recommend subscribers revisit the webinar, which covered the seven stocks and explained some of the Market Matters website's exciting functionality.
Social Media giant Meta Platforms surged after their results beat analysts' expectations, and they announced the company's first-ever quarterly dividend plus a $US50bn share buyback program, i.e. a greater than the entire market cap of Macquarie Group (MQG). Of the “Magnificent Seven,” last week we saw Meta Platforms (META US), NVIDIA (NVDA US), Amazon.com (AMZN US), Alphabet (GOOGL US), and Microsoft (MSFT US) all make fresh all-time highs while Apple Inc (AAPL US) and Tesla (TSLA US) struggled, plus Alphabet (GOOGL US) had reversed lower come Friday, in other words, its become the “Dominant Four”, not traditional broad-based buying but its proving hard to fight the tape at this stage.
The Australian Consumer Staples sector has struggled over recent years, but as MM looks to position portfolios more defensively, it's been on our radar of late, i.e. people have to eat. With interest rates set to fall through 2024/5, inflation under control and supply chain issues in the rearview mirror, the outlook has improved for the sector. The peak cost of living has passed, with spending growth on the horizon, helped by solid immigration, with supermarkets likely to be a key beneficiary.
Overnight saw the Fed hold interest rates steady for the 4th straight meeting while signalling its openness to cut, if not straight away. The Futures markets are now pricing in an implied Fed Funds rate of 3.695% in January 2025, well below today's effective 5.33% rate – we still believe this outlook will prove too dovish as we move through 2024. Jerome Powell shocked many doves when he effectively took a March cut off the table during the press conference, investors need to be patient!
As we look right across the suite of Market Matters Portfolio’s with an eye on increasing their defensive qualities, the Income Portfolio stands out as one that is already set very defensively, both in terms of overall asset allocation (49% in Equities, 37% Bonds & Hybrids, 8% in Property & 6% in Cash), but also in terms of the types of equities held, with a skew towards predictable earnings (some regulated), high yielding, low beta stocks. While this stance will cost us ‘upside’ in a strong market, it will help to smooth returns amid choppier conditions while maintaining strong levels of income, with the portfolio yielding over ~7% inclusive of franking.
Yesterday, China Evergrande Group received a liquidation order from a Hong Kong court, which was no major surprise when we consider the company's share price over recent years. China's property crisis continues to unfold, although a market nadir is often plumbed on headline bad news. The collapse of this previous poster child is by far the largest failure in the world's 2nd largest economy's property market, which has witnessed several defaults by developers, aka a falling pack of cards. In the short term, the move by Judge Linda Chan is likely to see some asset sales in a property market lacking liquidity and confidence; the world will be watching closely.
Reporting season, both locally and in the US, has already started to increase volatility on the stock level, with the majority of companies still to face the music, e.g. winners so far include ResMed (RMD) and Kogan (KGN) & losers Dominos (DMP) and Nanosonics (NAN). However, on the index level, we are still targeting a push to fresh highs by the ASX200, now less than 2% away. It's important to reiterate that MM is looking to migrate down the risk curve into such a move, but we are only looking to tweak portfolios as opposed to adopting an outright bearish stance.
Beijing has announced the PBOC will cut the bank's Reserve Requirement Ratio by 0.5% effective the 5th of February, the announcement sent stocks in Hong Kong surging up over 3.5% in rapid fashion, its largest daily gain in four months. The move is aimed at stimulating the economy by relaxing lending restrictions as the banks aren’t required to hold as much cash in reserve, a significant move which frees up about $US140bn. As we know, Beijing is also likely to put “pressure” on the banks to put this money to work, which should help their goal of kick-starting the economy.
The local index triggered a buy signal for MM on Monday when it traded back above 7460, with our ideal target being the 7650-7700 area, suggesting further “risk on” is the order of the day into February. However, it's important to reiterate that while MM is bullish over the coming weeks, we continue to believe the strong advance from late October is maturing, and we intend to migrate portfolios down the risk curve into further strength.
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.
