February saw short-dated bond yields test multi-month/year highs but their longer dated peers have been fairly subdued remaining well below levels reached in 2022. We have a bearish bias towards these longer dated yields due to our view that the domestic economy is weaker than the RBA believe – yesterdays data implies we may be proved correct sooner rather than later.
January saw investors become overly optimistic that central bank pivots were close at hand and rate cuts would add some cheer for mortgage holders into Christmas, the net result was the ASX200 roared +9.6% in less than 6 weeks i.e. more than the market average annual gain over the last 20-years. However, as we all know following some surprisingly strong economic data the RBA & Fed have stamped aggressively on any dovish outlook and suddenly markets are looking for official interest rates to peak at 4.4% in Australia and 5.4% in the US.
The correlation between the US S&P500 and its Telco Sector doesn’t reveal any standout information even though the telcos are often described as defensive investments i.e. a “top-down” approach to the telcos in today’s uncertain times would have many investors allocating funds to the defensives but as the chart below illustrates at this stage its all about stock selection as opposed playing the sector per se – we used the US because the ASX Telco Sector is dominated by Telstra (TLS).
The anticipated path of central banks continues to dominate the swings by stocks as they react to the continual flow of volatile economic data and accompanying rhetoric from the likes of the Fed & RBA. The correlation is very clear with the ASX rallying strongly when bond yields fell in early 2023 only to reverse when yields reversed higher earlier this month.
The ASX200 continues to face headwinds around the 7300 area but when we take into account what was thrown at the index yesterday the minor -0.4% pullback felt like a solid performance, the broad market actually rallied with nearly 60% of the main board finishing up on the day but when heavyweight BHP Group (BHP) tumbles -3.4% the result is almost inevitable – more on this and related names later.
The ASX200 put in a brave performance yesterday closing down just -0.3% in the process shrugging off a -2% drop by the US S&P500 plus Commonwealth Bank (CBA) trading ex-dividend $2.10 fully franked. The catalyst for the market’s impressive intra-day recovery was the wage data released at 11.30 am which showed wages are rising far less than expected and importantly well below the current rate of inflation i.e. everyone’s already getting worse off without the help of the RBA!
A peak Cash Rate close to 4% had been MM’s target for 2023 but after reading the minutes from this month’s RBA Meeting it now feels highly likely that Philip Lowe et al will push the local economy over the proverbial cliff in an attempt to crush inflation – shame it wasn’t more forward-thinking post-COVID as it ignored clear signs that inflation was on the loose i.e. one shop at Woolies would have told the tale!
The ASX200 trod water on Monday with the index rotating in a very tight 26-point range however beneath the hood it was a very different story with reporting season providing its usual volatility e.g. Inghams (ING) +11.%, NIB Holdings (NHF) -11.6%, and BlueScope (BSL) -10%. As we approach the halfway mark in this reporting calendar winners are ahead of losers by a nose but with Commonwealth Bank (CBA) falling over 8% last week after disappointing the market its no surprise that the index has struggled of late – with BHP Group (BHP) facing the music today the story looks poised for its next chapter.
If we are correct this merry-go-round of market opinion will dominate 2023 as economists and investors alike attempt to 2nd guess the Fed, RBA, BOE & Co. The RBA Chair Philip Lowe has become increasingly hawkish as the year evolves with the senate hearing not dampening his aggressive stance towards inflation. In our opinion it’s simply a year to watch for elastic bands stretching too far and fading the respective moves whether it be too hawkish, dovish focused on a recession, a recovery, or rate cuts in 2024 – they are all probably going come into play this year in one form or another.
The ASX200 delivered another fascinating session on Thursday with 8% of the main board moving by over 5%, with the winners dominating 15-1 it wasn’t surprising to see the index close up +0.8%, even with Commonwealth Bank (CBA) falling another -1.5%. Under the hood, the IT and Consumer Discretionary Sectors were the standouts both rallying +2.7% - interesting to see the interest rate-sensitive stocks outperform in a week when short-term bond yields are making 4-month highs.
January saw investors become overly optimistic that central bank pivots were close at hand and rate cuts would add some cheer for mortgage holders into Christmas, the net result was the ASX200 roared +9.6% in less than 6 weeks i.e. more than the market average annual gain over the last 20-years. However, as we all know following some surprisingly strong economic data the RBA & Fed have stamped aggressively on any dovish outlook and suddenly markets are looking for official interest rates to peak at 4.4% in Australia and 5.4% in the US.
The correlation between the US S&P500 and its Telco Sector doesn’t reveal any standout information even though the telcos are often described as defensive investments i.e. a “top-down” approach to the telcos in today’s uncertain times would have many investors allocating funds to the defensives but as the chart below illustrates at this stage its all about stock selection as opposed playing the sector per se – we used the US because the ASX Telco Sector is dominated by Telstra (TLS).
The anticipated path of central banks continues to dominate the swings by stocks as they react to the continual flow of volatile economic data and accompanying rhetoric from the likes of the Fed & RBA. The correlation is very clear with the ASX rallying strongly when bond yields fell in early 2023 only to reverse when yields reversed higher earlier this month.
The ASX200 continues to face headwinds around the 7300 area but when we take into account what was thrown at the index yesterday the minor -0.4% pullback felt like a solid performance, the broad market actually rallied with nearly 60% of the main board finishing up on the day but when heavyweight BHP Group (BHP) tumbles -3.4% the result is almost inevitable – more on this and related names later.
The ASX200 put in a brave performance yesterday closing down just -0.3% in the process shrugging off a -2% drop by the US S&P500 plus Commonwealth Bank (CBA) trading ex-dividend $2.10 fully franked. The catalyst for the market’s impressive intra-day recovery was the wage data released at 11.30 am which showed wages are rising far less than expected and importantly well below the current rate of inflation i.e. everyone’s already getting worse off without the help of the RBA!
A peak Cash Rate close to 4% had been MM’s target for 2023 but after reading the minutes from this month’s RBA Meeting it now feels highly likely that Philip Lowe et al will push the local economy over the proverbial cliff in an attempt to crush inflation – shame it wasn’t more forward-thinking post-COVID as it ignored clear signs that inflation was on the loose i.e. one shop at Woolies would have told the tale!
The ASX200 trod water on Monday with the index rotating in a very tight 26-point range however beneath the hood it was a very different story with reporting season providing its usual volatility e.g. Inghams (ING) +11.%, NIB Holdings (NHF) -11.6%, and BlueScope (BSL) -10%. As we approach the halfway mark in this reporting calendar winners are ahead of losers by a nose but with Commonwealth Bank (CBA) falling over 8% last week after disappointing the market its no surprise that the index has struggled of late – with BHP Group (BHP) facing the music today the story looks poised for its next chapter.
If we are correct this merry-go-round of market opinion will dominate 2023 as economists and investors alike attempt to 2nd guess the Fed, RBA, BOE & Co. The RBA Chair Philip Lowe has become increasingly hawkish as the year evolves with the senate hearing not dampening his aggressive stance towards inflation. In our opinion it’s simply a year to watch for elastic bands stretching too far and fading the respective moves whether it be too hawkish, dovish focused on a recession, a recovery, or rate cuts in 2024 – they are all probably going come into play this year in one form or another.
The ASX200 delivered another fascinating session on Thursday with 8% of the main board moving by over 5%, with the winners dominating 15-1 it wasn’t surprising to see the index close up +0.8%, even with Commonwealth Bank (CBA) falling another -1.5%. Under the hood, the IT and Consumer Discretionary Sectors were the standouts both rallying +2.7% - interesting to see the interest rate-sensitive stocks outperform in a week when short-term bond yields are making 4-month highs.
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