There have been a number of major issues locally with the likes of SGR and unlisted Crown but our penchant for an inquiry in Australia is arguably the main headwind – just ask the banks and aged care operators. We find it hard to imagine that Australian casinos are the only premises used by organised crime to launder funds and we question if the optimum course of action is for large fines to vanish into the government’s coffers while directors who received large bonuses along the way simply walk away untarnished into their next role.
Last week saw the US yield curve remain around levels not seen for 40 years with the 2-Years closing 0.93% above the 10s, traders are still pricing further hikes by the Fed (just fewer) and a likely recession thereafter. However, we believe the economic pessimism has become stretched and the yield curve will move back towards parity over the next 6-12 months which suggests if we do see a recession it will be shallow in nature.
The Greenback has tumbled to fresh 15-month lows this week as a Fed pivot appears extremely close at hand, in our opinion the move has been exacerbated by the defensive positioning of many investors who sought the safety of the $US during the recent macro-economic and geopolitical uncertainty. The correlation between US bond yields and the $US is not surprisingly strong with much lower levels on the agenda if we do indeed see US 2-year bond yields back under 4%.
This week saw Megaport (MP1) surge higher following an upgrade which indicated that the company resetting strategy was working i.e. implementation of pricing & cost-out initiatives and a pivot back to a direct sales model. However, another huge factor in the stock’s move was fund managers were positioned underweight the stock and traders short hence following the news there was a dearth of sellers, to say the least!
The ASX200 surged higher yesterday significantly outstripping a solid session on Wall Street, the local market ended up +1.5% with over 90% of the main board closing in positive territory. A particularly aggressive final 10 minutes saw strong buying in the SPI Futures suggesting some position covering following the volume selling witnessed over recent weeks. While all 11 sectors closed higher on the day the fact that 8% of the main board closed up more than 4% while no stocks fell by 2% really illustrates the market’s strength into tonight’s potentially pivotal CPI.
The ever-existent problem with catching “falling knifes” in the share market is the intrinsic reason behind why a company has been struggling i.e. history tells us that buying stocks making fresh quarterly lows leads to portfolio underperformance hence it must be recognised as a contrarian play with exposure aligned accordingly.
Equities seemed to buckle under the weight of bond yields last week with all of the major indices enduring a tough week. In many developed countries including Australia, Canada, New Zealand, the UK, and the US short-dated bond yields posting fresh multi-year highs appeared to be the catalyst for the falls. At MM we believe the short-term undoing for stocks was primarily down to the market being positioned incorrectly.
Most investors are far better buyers than sellers, no great surprise as we are all wired to be emotionally dominated by “Fear & Greed”. However common sense tells us that selling is every bit as important as buying as it plays an equal role in our alternatives at any one time i.e. buy, sell or simply do nothing.
In $US terms gold has corrected almost 10% from its May high as the expected path for interest rates has been pushed out i.e. rates higher for longer. After hiking rates at an unprecedented level over the last year, central banks are clearly committed to quelling inflation and they’re prepared to push the global economy into a recession if required.
The ASX200 embraced the RBA pause yesterday rallying +0.6% after the announcement on fairly broad-based buying that saw over 70% of the main board close higher, positive sentiment was compounded by a fresh bout of M&A action with Costa Group (CGC) and Austal (ASB) reminding Active Investors like ourselves that stocks will only remain undervalued for so long before the buyers surface. All local stocks need now is further economic stimulus from China and a break out to all-time highs will be back on the table, now less than 5% away.
Last week saw the US yield curve remain around levels not seen for 40 years with the 2-Years closing 0.93% above the 10s, traders are still pricing further hikes by the Fed (just fewer) and a likely recession thereafter. However, we believe the economic pessimism has become stretched and the yield curve will move back towards parity over the next 6-12 months which suggests if we do see a recession it will be shallow in nature.
The Greenback has tumbled to fresh 15-month lows this week as a Fed pivot appears extremely close at hand, in our opinion the move has been exacerbated by the defensive positioning of many investors who sought the safety of the $US during the recent macro-economic and geopolitical uncertainty. The correlation between US bond yields and the $US is not surprisingly strong with much lower levels on the agenda if we do indeed see US 2-year bond yields back under 4%.
This week saw Megaport (MP1) surge higher following an upgrade which indicated that the company resetting strategy was working i.e. implementation of pricing & cost-out initiatives and a pivot back to a direct sales model. However, another huge factor in the stock’s move was fund managers were positioned underweight the stock and traders short hence following the news there was a dearth of sellers, to say the least!
The ASX200 surged higher yesterday significantly outstripping a solid session on Wall Street, the local market ended up +1.5% with over 90% of the main board closing in positive territory. A particularly aggressive final 10 minutes saw strong buying in the SPI Futures suggesting some position covering following the volume selling witnessed over recent weeks. While all 11 sectors closed higher on the day the fact that 8% of the main board closed up more than 4% while no stocks fell by 2% really illustrates the market’s strength into tonight’s potentially pivotal CPI.
The ever-existent problem with catching “falling knifes” in the share market is the intrinsic reason behind why a company has been struggling i.e. history tells us that buying stocks making fresh quarterly lows leads to portfolio underperformance hence it must be recognised as a contrarian play with exposure aligned accordingly.
Equities seemed to buckle under the weight of bond yields last week with all of the major indices enduring a tough week. In many developed countries including Australia, Canada, New Zealand, the UK, and the US short-dated bond yields posting fresh multi-year highs appeared to be the catalyst for the falls. At MM we believe the short-term undoing for stocks was primarily down to the market being positioned incorrectly.
Most investors are far better buyers than sellers, no great surprise as we are all wired to be emotionally dominated by “Fear & Greed”. However common sense tells us that selling is every bit as important as buying as it plays an equal role in our alternatives at any one time i.e. buy, sell or simply do nothing.
In $US terms gold has corrected almost 10% from its May high as the expected path for interest rates has been pushed out i.e. rates higher for longer. After hiking rates at an unprecedented level over the last year, central banks are clearly committed to quelling inflation and they’re prepared to push the global economy into a recession if required.
The ASX200 embraced the RBA pause yesterday rallying +0.6% after the announcement on fairly broad-based buying that saw over 70% of the main board close higher, positive sentiment was compounded by a fresh bout of M&A action with Costa Group (CGC) and Austal (ASB) reminding Active Investors like ourselves that stocks will only remain undervalued for so long before the buyers surface. All local stocks need now is further economic stimulus from China and a break out to all-time highs will be back on the table, now less than 5% away.
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.
