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:
Novembers Bank of America Fund Managers Survey came out last week and it showed a whopping 92% of the respondents are expecting stagflation in 2023, generally a far worse scenario than a recession because any of the common levers used to reduce inflation will damage further the deteriorating growth and employment backdrop.
The ASX200 rallied +0.2% on Thursday with over 70% of the main board advancing, unfortunately, weakness across the influential resources stocks restrained a generally enthusiastic market e.g. Woodside Energy (WDS) -2.2%, BHP Group (BHP) -1.5%, Sandfire Resources (SFR) -3% and South32 (S32) -5.2%. It’s a touch boring but the story remains the same as the index starts to establish a small trading range between 7100 and 7200. On the stock and sector levels, it’s pretty quiet as December approaches fast, perhaps after a tough year so far fund managers...
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:
Novembers Bank of America Fund Managers Survey came out last week and it showed a whopping 92% of the respondents are expecting stagflation in 2023, generally a far worse scenario than a recession because any of the common levers used to reduce inflation will damage further the deteriorating growth and employment backdrop.
The ASX200 rallied +0.2% on Thursday with over 70% of the main board advancing, unfortunately, weakness across the influential resources stocks restrained a generally enthusiastic market e.g. Woodside Energy (WDS) -2.2%, BHP Group (BHP) -1.5%, Sandfire Resources (SFR) -3% and South32 (S32) -5.2%. It’s a touch boring but the story remains the same as the index starts to establish a small trading range between 7100 and 7200. On the stock and sector levels, it’s pretty quiet as December approaches fast, perhaps after a tough year so far fund managers...
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