A tepid start to the trading week locally with a small 0.10% gain at the index level courtesy of strength amongst the financial stocks which have enjoyed the onset of higher interest rates, the hope that margin pressure will ease along with some large looming dividends is a hard 1-2 combo to pass up. All the talk this year has been about how hot the Energy & Materials stocks have been and rightly so, however, it’s the boring/defensive sector of Ulilities that has been the quiet achiever. In a little over 3 months, the sector that comprises the likes of APA Group (APA), Origin Energy (ORG) & AGL Energy (AGL) is up over 17%, dramatically outperforming last year’s ‘go-to’ tech sector by more than 35%. As we often say at Market Matters, keep an open mind and 2022 is so far delivering on that call.
Last week saw the ASX200 consolidate its recent rally just below all-time highs despite the growing chorus for the RBA to act sooner rather than later and commence the inevitable interest rate tightening cycle, joining the US & Canada who raised by 0.25% in March and New Zealand who have now pushed through three rate increases taking the official cash rate to 1%. When the RBA cut rates way back in November of 2020 to the emergency setting of just 0.10% they based their decision on economic forecasts. By the end of 2022 they thought unemployment would be 6% and inflation would be 1.5%, as it stands now we have unemployment at 4% and inflation at 3.5%, a long way from these economic assumptions.
The local market endured a bad day at the office yesterday falling -0.6% as we followed the US futures lower through both their day session and again during our day time / their overnight session. Over 70% of the mainboards stocks slid on Thursday but it was again the growth stocks that weighed the most on the ASX with all members closing lower leaving the overall sector down -3.5%, ultimately it was a fairly uninspiring day that saw the SPI Futures close where they were trading at 10am.
The local market fought valiantly on Wednesday to recover from a very shaky start finally closing down exactly -0.5%, although only 31% of the market closed up on the day a strong session across the influential Banking Sector was enough to offset the broad based losses across the tech and resources stocks. The sentiment towards the banks appears to have lifted following yesterday’s RBA comments which strongly implied they would start hiking interest rates sooner rather than later, historically banks improve their margins in a higher rate environment, assuming bad debts remain stable. Our view towards the sector hasn’t changed for months and if MM is correct things should start to get interesting:
Yesterday saw the ASX200 surrender most of the days early gains following the RBA’s interest rate decision and accompanying rhetoric but it still managed to eke out a +0.2% gain as the local index inches ever closer to an all-time high, now only 1.3% away. The Tech Sector followed their US peers higher on Tuesday ending the day up +3.15% with every stock in the main board’s sector closing up on the day – MM is still looking for the growth names to outperform over the coming weeks/months but rotation keeps threatening and failing to follow through.
We’ve started off the first full week of April with a small +0.3% advance courtesy of broad-based gains offsetting a tired looking Banking Sector although the miners and utilities stocks continued to shine as they have through most of 2022 – if the market remains in sync with our roadmap for the year we see no reason to anticipate a significant change in relative sector performance until we do find an inflection point. This ties in with our recent stance towards the local miners:
The ASX200 has commenced a historically strong few weeks less than 2% below its all-time high with a feeling of inevitability in the air – MM has been targeting the 7700-7800 area for months and at this stage, we feel on point. However, there is usually a sting in this tail for equities because both locally and overseas May / June are usually the worst seasonal combined months for stocks e.g. the Average return for the ASX200 over the last 20-year during these 2-months is -1.0% and we should remember that during most of this time stocks have been enjoying a strong bull market hence the regularly quoted phrase “sell in May & go away”.
Yesterday we waved goodbye to a volatile Q1 which saw the ASX200 initially drop -9.2% in January before slowly but surely recovering all of the losses before managing to end the quarter slightly higher. The highlight of the last 3-months would probably go to the explosive rise in bond yields but there were a few rivals for the mantle including surging commodity prices courtesy of Russia’s invasion of Ukraine and supply chain issues which stubbornly aren’t going away, the net result was a market of 2 halves, excuse the cliché, with value stocks like banks and resources rallying at the expense of growth names such as tech and healthcare.
Wednesday saw the ASX200 continue its march towards new all-time highs finally closing up another 50-points, the index closed within 1.6% of its previous milestone set back in August of 2021. Gains were reasonably broad-based although we still saw over 30% of the index close in the red, the resources again weighed on the index while the growth related stocks were the standout winners e.g. Xero (XRO) +5.3%, Megaport (MP1) +7% and carsales.com (CAR) +3.5% - we are seeing a new trend emerge, if bond yields simply trade sideways then tech stocks extend their recovery. However the current “bounce” can be put into perspective when we consider how some of the individual...
The ASX200 rallied another +0.7% on Tuesday taking the local index to within 2.3% of its 2021 all-time high – our call for a test of 7700-7800 through March & April is starting to feel almost conservative. Gains were broad-based yesterday with over 75% of stocks rallying, only the previously “hot” energy and resources stocks slipped lower while growth stocks regained their mojo with a small degree of gusto as bond yields took a rest, although there was no signs of them falling.
Last week saw the ASX200 consolidate its recent rally just below all-time highs despite the growing chorus for the RBA to act sooner rather than later and commence the inevitable interest rate tightening cycle, joining the US & Canada who raised by 0.25% in March and New Zealand who have now pushed through three rate increases taking the official cash rate to 1%. When the RBA cut rates way back in November of 2020 to the emergency setting of just 0.10% they based their decision on economic forecasts. By the end of 2022 they thought unemployment would be 6% and inflation would be 1.5%, as it stands now we have unemployment at 4% and inflation at 3.5%, a long way from these economic assumptions.
The local market endured a bad day at the office yesterday falling -0.6% as we followed the US futures lower through both their day session and again during our day time / their overnight session. Over 70% of the mainboards stocks slid on Thursday but it was again the growth stocks that weighed the most on the ASX with all members closing lower leaving the overall sector down -3.5%, ultimately it was a fairly uninspiring day that saw the SPI Futures close where they were trading at 10am.
The local market fought valiantly on Wednesday to recover from a very shaky start finally closing down exactly -0.5%, although only 31% of the market closed up on the day a strong session across the influential Banking Sector was enough to offset the broad based losses across the tech and resources stocks. The sentiment towards the banks appears to have lifted following yesterday’s RBA comments which strongly implied they would start hiking interest rates sooner rather than later, historically banks improve their margins in a higher rate environment, assuming bad debts remain stable. Our view towards the sector hasn’t changed for months and if MM is correct things should start to get interesting:
Yesterday saw the ASX200 surrender most of the days early gains following the RBA’s interest rate decision and accompanying rhetoric but it still managed to eke out a +0.2% gain as the local index inches ever closer to an all-time high, now only 1.3% away. The Tech Sector followed their US peers higher on Tuesday ending the day up +3.15% with every stock in the main board’s sector closing up on the day – MM is still looking for the growth names to outperform over the coming weeks/months but rotation keeps threatening and failing to follow through.
We’ve started off the first full week of April with a small +0.3% advance courtesy of broad-based gains offsetting a tired looking Banking Sector although the miners and utilities stocks continued to shine as they have through most of 2022 – if the market remains in sync with our roadmap for the year we see no reason to anticipate a significant change in relative sector performance until we do find an inflection point. This ties in with our recent stance towards the local miners:
The ASX200 has commenced a historically strong few weeks less than 2% below its all-time high with a feeling of inevitability in the air – MM has been targeting the 7700-7800 area for months and at this stage, we feel on point. However, there is usually a sting in this tail for equities because both locally and overseas May / June are usually the worst seasonal combined months for stocks e.g. the Average return for the ASX200 over the last 20-year during these 2-months is -1.0% and we should remember that during most of this time stocks have been enjoying a strong bull market hence the regularly quoted phrase “sell in May & go away”.
Yesterday we waved goodbye to a volatile Q1 which saw the ASX200 initially drop -9.2% in January before slowly but surely recovering all of the losses before managing to end the quarter slightly higher. The highlight of the last 3-months would probably go to the explosive rise in bond yields but there were a few rivals for the mantle including surging commodity prices courtesy of Russia’s invasion of Ukraine and supply chain issues which stubbornly aren’t going away, the net result was a market of 2 halves, excuse the cliché, with value stocks like banks and resources rallying at the expense of growth names such as tech and healthcare.
Wednesday saw the ASX200 continue its march towards new all-time highs finally closing up another 50-points, the index closed within 1.6% of its previous milestone set back in August of 2021. Gains were reasonably broad-based although we still saw over 30% of the index close in the red, the resources again weighed on the index while the growth related stocks were the standout winners e.g. Xero (XRO) +5.3%, Megaport (MP1) +7% and carsales.com (CAR) +3.5% - we are seeing a new trend emerge, if bond yields simply trade sideways then tech stocks extend their recovery. However the current “bounce” can be put into perspective when we consider how some of the individual...
The ASX200 rallied another +0.7% on Tuesday taking the local index to within 2.3% of its 2021 all-time high – our call for a test of 7700-7800 through March & April is starting to feel almost conservative. Gains were broad-based yesterday with over 75% of stocks rallying, only the previously “hot” energy and resources stocks slipped lower while growth stocks regained their mojo with a small degree of gusto as bond yields took a rest, although there was no signs of them falling.
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