The phrase “what a difference a day/week etc” makes is often used liberally but 2022 certainly qualifies when it comes to interest rates, yesterday saw the RBA hike the Official Cash Rate for a record 8 consecutive times taking us from an all-time low of 0.1% to a 10 year high above 3%. Australia has seen 2 major extremes in the blink of an eye, it feels like only yesterday when Philip Lowe said that interest rates would stay low until 2024 – he actually started the rhetoric in 2020 and continued it through much of 2021.
The ASX200 rallied another +0.3% on Monday courtesy of China’s reopening shift which propelled resource stocks higher on hopes that the global economy can avoid a deep contraction in 2023, unfortunately, the move caused the market to polarise as bond yields rallied in line with the optimism towards the growth outlook. The move in bonds resulted in over half of the market closing lower but when the heavyweight resources advance strongly the market often ignores the crowd:
Most people think 2022 has been an awful year for equities but performance has actually been very stock/sector-specific, it hasn’t been an annulus horribilis for broad market investors. The ASX200 will commence its run towards Christmas this morning down less than 2% with dividends for the average portfolio more than making up for the slight fall. Last week we saw dovish comments from Fed Chair Jerome Powell weigh on bond yields and the $US which in turn ignited the interest rate-sensitive pockets of the stock market which could easily see the ASX close up for the year:
The ASX200 surged higher on the 1stday of December as it celebrated Jerome Powell’s first meaningfully dovish comments of 2022, the result on the stock level was very much as expected with interest rate sensitive names finally hogging the limelight e.g. four stocks held at MM soared higher, Evolution Mining (EVN) +6.3%, Xero (XRO) +6.2%, James Hardie (JHX) +5.4% and Sandfire (SFR) +5.2%. We have been positioned for such a move for over a month so let’s hope it’s not a “one and done” knee-jerk rally following the Fed Chairs speech.
• “The time for moderating the pace of rate increases may come as soon as the December meeting” – Jerome Powell, Chair of the Fed Reserve.
The gains were broad-based across the market with over 75% of the main board closing in positive territory, only the Energy & Healthcare Sectors closed down on the day which saw the ASX200 trade within 3.6% of its all-time high posted in August of 2021 – what bear market! The defensives are not surprisingly the main area dragging the chain which could provide MM with some excellent switching opportunities when we feel its time to migrate back down the risk curve:
We’ve already seen some massive squeezes through July/August this year with Zip (Z1P) coming to mind but with the ASX already knocking on the door of its all-time high, we question what stocks/sectors investors will remain comfortable chasing higher with 7600 less than 4% away from where we are set to open this morning – the bears clearly are not enjoying the last quarter of 2022.
The news would imply otherwise but reopening bets have propelled Chinese equities towards their best month in years i.e. the markets are saying when not if, will Beijing shift away from its economically damaging Covid-zero policy. The last 2-years have seen Chinese indices plunge over 40% under the weight of both a domestic property crisis and ongoing Covid restrictions. However, with 24 hours remaining Chinese stocks in Hong Kong are set for their best month since 2003 while the Yuan is set for its largest monthly advance in 4 years.
The Covid pandemic had a very mixed impact on Australian Healthcare stocks with investors appearing to get far too optimistic towards the beneficiaries as we saw with Healius (HLS) yesterday whose Covid testing revenue has already plunged 85% taking the stock down 45% in less than 12-months.
Last week was steady as she goes with US markets enjoying a shortened week courtesy of the Thanksgiving Holiday, the main point of interest to MM was the softening of rhetoric from the Fed in their latest minutes:
Fed officials expect to switch to smaller interest rate hikes “soon” – perhaps only a 0.5% move in January after the previous four consecutive 0.75% hikes.
Officials are becoming concerned about the impact on the economy after 2-year bond yields have rallied from basically zero to close to 5% in around 18 months.
As most subscribers know rising bond yields have weighed very heavily on the growth of stocks, with tech front and centre, the problem is term deposits are now yielding more than the S&P500 hence investors need to be confident capital gains are likely moving forward, otherwise, why would they take on the added risk. Over the last 6 months, every time the market became vaguely optimistic around peak inflation/interest rates Fed officials took an almost sledgehammer approach to reiterate their hawkish stance towards reigning in inflation, but in the last week we’ve finally seen some real glimmers of hope that they will ease off sooner rather than later.
The ASX200 edged higher yesterday finally closing up 10-points after surrendering 2/3 of the day’s gains in the late afternoon, while the winners and losers were evenly matched it was a very interesting story of three commodities on the stock/sector level:
The ASX200 pushed up to test its June highs this morning, an impressive +13% rise from October’s panic low, it’s now surprisingly only 5.3% below its all-time peak – it certainly doesn’t feel like it in some pockets of the market. Heavyweights such as Commonwealth Bank (CBA) and BHP Group (BHP) have rallied strongly over recent weeks but numerous stocks remain in the “naughty corner” so far this quarter, and in 2022:
The ASX200 rallied another +0.3% on Monday courtesy of China’s reopening shift which propelled resource stocks higher on hopes that the global economy can avoid a deep contraction in 2023, unfortunately, the move caused the market to polarise as bond yields rallied in line with the optimism towards the growth outlook. The move in bonds resulted in over half of the market closing lower but when the heavyweight resources advance strongly the market often ignores the crowd:
Most people think 2022 has been an awful year for equities but performance has actually been very stock/sector-specific, it hasn’t been an annulus horribilis for broad market investors. The ASX200 will commence its run towards Christmas this morning down less than 2% with dividends for the average portfolio more than making up for the slight fall. Last week we saw dovish comments from Fed Chair Jerome Powell weigh on bond yields and the $US which in turn ignited the interest rate-sensitive pockets of the stock market which could easily see the ASX close up for the year:
The ASX200 surged higher on the 1stday of December as it celebrated Jerome Powell’s first meaningfully dovish comments of 2022, the result on the stock level was very much as expected with interest rate sensitive names finally hogging the limelight e.g. four stocks held at MM soared higher, Evolution Mining (EVN) +6.3%, Xero (XRO) +6.2%, James Hardie (JHX) +5.4% and Sandfire (SFR) +5.2%. We have been positioned for such a move for over a month so let’s hope it’s not a “one and done” knee-jerk rally following the Fed Chairs speech.
• “The time for moderating the pace of rate increases may come as soon as the December meeting” – Jerome Powell, Chair of the Fed Reserve.
The gains were broad-based across the market with over 75% of the main board closing in positive territory, only the Energy & Healthcare Sectors closed down on the day which saw the ASX200 trade within 3.6% of its all-time high posted in August of 2021 – what bear market! The defensives are not surprisingly the main area dragging the chain which could provide MM with some excellent switching opportunities when we feel its time to migrate back down the risk curve:
We’ve already seen some massive squeezes through July/August this year with Zip (Z1P) coming to mind but with the ASX already knocking on the door of its all-time high, we question what stocks/sectors investors will remain comfortable chasing higher with 7600 less than 4% away from where we are set to open this morning – the bears clearly are not enjoying the last quarter of 2022.
The news would imply otherwise but reopening bets have propelled Chinese equities towards their best month in years i.e. the markets are saying when not if, will Beijing shift away from its economically damaging Covid-zero policy. The last 2-years have seen Chinese indices plunge over 40% under the weight of both a domestic property crisis and ongoing Covid restrictions. However, with 24 hours remaining Chinese stocks in Hong Kong are set for their best month since 2003 while the Yuan is set for its largest monthly advance in 4 years.
The Covid pandemic had a very mixed impact on Australian Healthcare stocks with investors appearing to get far too optimistic towards the beneficiaries as we saw with Healius (HLS) yesterday whose Covid testing revenue has already plunged 85% taking the stock down 45% in less than 12-months.
Last week was steady as she goes with US markets enjoying a shortened week courtesy of the Thanksgiving Holiday, the main point of interest to MM was the softening of rhetoric from the Fed in their latest minutes:
Fed officials expect to switch to smaller interest rate hikes “soon” – perhaps only a 0.5% move in January after the previous four consecutive 0.75% hikes.
Officials are becoming concerned about the impact on the economy after 2-year bond yields have rallied from basically zero to close to 5% in around 18 months.
As most subscribers know rising bond yields have weighed very heavily on the growth of stocks, with tech front and centre, the problem is term deposits are now yielding more than the S&P500 hence investors need to be confident capital gains are likely moving forward, otherwise, why would they take on the added risk. Over the last 6 months, every time the market became vaguely optimistic around peak inflation/interest rates Fed officials took an almost sledgehammer approach to reiterate their hawkish stance towards reigning in inflation, but in the last week we’ve finally seen some real glimmers of hope that they will ease off sooner rather than later.
The ASX200 edged higher yesterday finally closing up 10-points after surrendering 2/3 of the day’s gains in the late afternoon, while the winners and losers were evenly matched it was a very interesting story of three commodities on the stock/sector level:
The ASX200 pushed up to test its June highs this morning, an impressive +13% rise from October’s panic low, it’s now surprisingly only 5.3% below its all-time peak – it certainly doesn’t feel like it in some pockets of the market. Heavyweights such as Commonwealth Bank (CBA) and BHP Group (BHP) have rallied strongly over recent weeks but numerous stocks remain in the “naughty corner” so far this quarter, and in 2022:
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.
