The ASX200 was smacked for the 2nd day this week as UBS’s more cautious rhetoric towards the banks continued to drive the influential sector lower e.g. Commonwealth Bank (CBA) -2.6% and Westpac (WBC) -3.7%. I can feel the questions brewing up for the weekend report “is it time to buy the banks?”, firstly lets simply revert to the seasonal statistics as the financials dance to their common June tune:
The ASX200 put in an average performance yesterday after a promising start as it attempted to recoup some of Tuesday’s plunge following the RBAs aggressive rate hike, we finally closed up 25-points after the index surrendered over half of its early gains as the banks took one of their biggest hits in a long time e.g. Westpac (WBC) -6.1% and Commonwealth Bank (CBA) -4.4%. MM had highlighted earlier in the month that the banks usually struggle through June but even we were surprised by the severity of their decline – we cited this seasonal weakness looming on the horizon as a headwind for the ASX over the coming weeks...
The ASX200 was thumped -1.5% yesterday after the RBA pressed hard on the jugular of the Australian economy, its 0.5% rate hike to 0.85% was the largest in over 20-years with more rate increases promised into 2023, the futures market is now pricing in a Cash Rate of 3.1% come December.
The ASX200 commenced the week on the back foot falling -0.45%, erasing the month of Junes small gain in the process, the selling was light but fairly broad-based with less than 20% of the main board managing to rally on Monday. With both the US & UK after-market Futures rallying strongly throughout the day AEST it felt like the local market was being held hostage by the RBA’s interest rate decision at 2.30 pm today – there are mixed opinions as to how far Philip Lowe will go with the interest rate markets pricing in a 0.28% rate hike and for the cash rate to reach 2.9% by the end of 2022. Markets hate uncertainty hence if overseas markets remain well supported...
The ASX200 is trading -5.2% below its all-time high posted in 2021 while the more tech-oriented S&P500 is anchored -14.6% below its equivalent milestone. Bond yields, inflation, interest rates etc have undoubtedly been the main driver of the pullback in equities although it’s been well supported by Russia’s invasion of Ukraine and ongoing supply chain disruptions courtesy of COVID. However there is another cloud looming on the horizon that is likely to weigh on meaningful recovery attempts, MM has touched on Money Supply a few times over recent months but it’s looking increasingly likely to hamper equities moving forward. The Fed has turned off the free money tap...
The ASX200 ended Thursday down -0.8% on broad-based selling, only 20% of the index managed to close in positive territory with the gains focused on the energy names plus a relatively small bounce by the battery metals stocks that were hammered on Wednesday. With the exception of the Utilities Sector, there was nowhere to hide although the decline felt more like a lack of interest by the buyers as opposed to aggressive selling e.g. only 4% of the index fell by more than 5% whereas on Wednesday we had the same number of stocks plunge by over 10%. The tech stocks were again the weakest link falling over 2% following strong US economic data reigniting fear of more aggressive rate hikes over the coming 12-18 months.
The ASX200 experienced a choppy Wednesday but some healthy buying into the close finally saw the index enjoy a gain of +0.3%. Stock & sector rotation was yet again the main game in town with 10% of the main board falling by over -5% while 7 names were hammered by more than -10%, however the influential banks recovered some of their recent losses which when combined with advances by the major iron ore producers was enough to take the index higher even with less than 40% of stocks rallying. This time the underlying theme was clearly “risk-off” with a couple of specific sectors receiving close attention from the sellers:
The ASX200 was sold off over 1% yesterday in classic “two steps forward – one step back” fashion i.e. after basically rallying from 7100 to 7300 in just 2-days we’re back at 7200, the middle of the last 12-months trading range. The banks weighed on the index on Tuesday with the “Big Four” falling an average of 2% while the Tech Sector was back under pressure falling -1.9% however losses were fairly broad-based with 65% of the main board declining as “risk off” seems to follow “risk on” as fast as night follows day!
The ASX200 rallied strongly on Monday delivering an emphatic “risk on” session which saw 85% of stocks advance while only the Utilities Sector closed down on the day, the message from investors was loud and clear – “Goodbye & good riddance to April + May!” As we’ve discussed through recent reports bond yields feel like they’ve topped out for now hence under the hood sector rotation is underway as portfolios that are largely positioned for surging inflation have their hawkish skew at least tempered. We believe yesterday’s relative performance moves across the market groups / sectors will largely follow through, at least short-term:
Over recent weeks MM have repeatedly remarked about how bearish investors both feel and are positioned with a number of measures sitting at decade extremes, not a scenario that usually lasts particularly long before we experience a squeeze of the complacent crowded position. After 7 consecutive weeks of falls, the S&P500 rallied +6.6% last week with sellers appearing to exhaust themselves as we saw hints of some Fed flexibility over the coming months. The data in our opinion while mixed definitely challenged many analysts’ views that we are on an inevitable path of higher rates followed by a subsequent recession. MM saw a few pockets of clear optimism last week:
The ASX200 put in an average performance yesterday after a promising start as it attempted to recoup some of Tuesday’s plunge following the RBAs aggressive rate hike, we finally closed up 25-points after the index surrendered over half of its early gains as the banks took one of their biggest hits in a long time e.g. Westpac (WBC) -6.1% and Commonwealth Bank (CBA) -4.4%. MM had highlighted earlier in the month that the banks usually struggle through June but even we were surprised by the severity of their decline – we cited this seasonal weakness looming on the horizon as a headwind for the ASX over the coming weeks...
The ASX200 was thumped -1.5% yesterday after the RBA pressed hard on the jugular of the Australian economy, its 0.5% rate hike to 0.85% was the largest in over 20-years with more rate increases promised into 2023, the futures market is now pricing in a Cash Rate of 3.1% come December.
The ASX200 commenced the week on the back foot falling -0.45%, erasing the month of Junes small gain in the process, the selling was light but fairly broad-based with less than 20% of the main board managing to rally on Monday. With both the US & UK after-market Futures rallying strongly throughout the day AEST it felt like the local market was being held hostage by the RBA’s interest rate decision at 2.30 pm today – there are mixed opinions as to how far Philip Lowe will go with the interest rate markets pricing in a 0.28% rate hike and for the cash rate to reach 2.9% by the end of 2022. Markets hate uncertainty hence if overseas markets remain well supported...
The ASX200 is trading -5.2% below its all-time high posted in 2021 while the more tech-oriented S&P500 is anchored -14.6% below its equivalent milestone. Bond yields, inflation, interest rates etc have undoubtedly been the main driver of the pullback in equities although it’s been well supported by Russia’s invasion of Ukraine and ongoing supply chain disruptions courtesy of COVID. However there is another cloud looming on the horizon that is likely to weigh on meaningful recovery attempts, MM has touched on Money Supply a few times over recent months but it’s looking increasingly likely to hamper equities moving forward. The Fed has turned off the free money tap...
The ASX200 ended Thursday down -0.8% on broad-based selling, only 20% of the index managed to close in positive territory with the gains focused on the energy names plus a relatively small bounce by the battery metals stocks that were hammered on Wednesday. With the exception of the Utilities Sector, there was nowhere to hide although the decline felt more like a lack of interest by the buyers as opposed to aggressive selling e.g. only 4% of the index fell by more than 5% whereas on Wednesday we had the same number of stocks plunge by over 10%. The tech stocks were again the weakest link falling over 2% following strong US economic data reigniting fear of more aggressive rate hikes over the coming 12-18 months.
The ASX200 experienced a choppy Wednesday but some healthy buying into the close finally saw the index enjoy a gain of +0.3%. Stock & sector rotation was yet again the main game in town with 10% of the main board falling by over -5% while 7 names were hammered by more than -10%, however the influential banks recovered some of their recent losses which when combined with advances by the major iron ore producers was enough to take the index higher even with less than 40% of stocks rallying. This time the underlying theme was clearly “risk-off” with a couple of specific sectors receiving close attention from the sellers:
The ASX200 was sold off over 1% yesterday in classic “two steps forward – one step back” fashion i.e. after basically rallying from 7100 to 7300 in just 2-days we’re back at 7200, the middle of the last 12-months trading range. The banks weighed on the index on Tuesday with the “Big Four” falling an average of 2% while the Tech Sector was back under pressure falling -1.9% however losses were fairly broad-based with 65% of the main board declining as “risk off” seems to follow “risk on” as fast as night follows day!
The ASX200 rallied strongly on Monday delivering an emphatic “risk on” session which saw 85% of stocks advance while only the Utilities Sector closed down on the day, the message from investors was loud and clear – “Goodbye & good riddance to April + May!” As we’ve discussed through recent reports bond yields feel like they’ve topped out for now hence under the hood sector rotation is underway as portfolios that are largely positioned for surging inflation have their hawkish skew at least tempered. We believe yesterday’s relative performance moves across the market groups / sectors will largely follow through, at least short-term:
Over recent weeks MM have repeatedly remarked about how bearish investors both feel and are positioned with a number of measures sitting at decade extremes, not a scenario that usually lasts particularly long before we experience a squeeze of the complacent crowded position. After 7 consecutive weeks of falls, the S&P500 rallied +6.6% last week with sellers appearing to exhaust themselves as we saw hints of some Fed flexibility over the coming months. The data in our opinion while mixed definitely challenged many analysts’ views that we are on an inevitable path of higher rates followed by a subsequent recession. MM saw a few pockets of clear optimism last week:
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