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 last 12 months have thrown a spanner in the works of normal logic when we look at bond yields and leading economic bellwether, Dr. Copper, the hawkish rhetoric from the Fed is the obvious explanation but at some point in time, the usual correlation breakdown is likely to unwind. We shouldn’t forget the Fed got it very wrong when it came to timing interest rate hikes, letting inflation rip in the process, what’s to say they don’t make an equally poor call with the timing of when to back off and let the US economy breathe:
The ASX200 experienced a quiet start to the penultimate week of November which saw winners and losers match each other almost perfectly, the index ultimately slipped -0.2% to add to the consolidation of the market since testing 7200 last week. The ongoing sector rotation continues in a predictable fashion depending on strength/weakness in bond yields and the $US. Yesterday saw the $US kick up almost 1% leading to a very clear group of winners and losers which are likely to be reversed if/when we see the Greenback dip back under 107:
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 last 12 months have thrown a spanner in the works of normal logic when we look at bond yields and leading economic bellwether, Dr. Copper, the hawkish rhetoric from the Fed is the obvious explanation but at some point in time, the usual correlation breakdown is likely to unwind. We shouldn’t forget the Fed got it very wrong when it came to timing interest rate hikes, letting inflation rip in the process, what’s to say they don’t make an equally poor call with the timing of when to back off and let the US economy breathe:
The ASX200 experienced a quiet start to the penultimate week of November which saw winners and losers match each other almost perfectly, the index ultimately slipped -0.2% to add to the consolidation of the market since testing 7200 last week. The ongoing sector rotation continues in a predictable fashion depending on strength/weakness in bond yields and the $US. Yesterday saw the $US kick up almost 1% leading to a very clear group of winners and losers which are likely to be reversed if/when we see the Greenback dip back under 107:
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