The ASX200 fought hard to rally last week but Fridays -1.6% drop resulted in a small weekly decline for the index although most sectors rallied it was a more than -5% drop by both the Tech and Materials Sectors that led to the small pullback, basically the local index experienced a 4th week of consolidation following the strong gains through March. A couple of major stocks caught our attention and they might be setting the tone for May:
The second weak of April saw consolidation at the index level with the ASX closing the week 0.20% lower, a positive outcome really given the continued headwind from rising rates into a market that is just 2% below all time highs.
However, when we stand back and look at earnings, the most important driver of stocks over time, the profile of the ASX has been picking up thanks in part to higher commodity prices and in particular, plenty of upgrades in the Lithium space. While some question the strength of the market, earnings are also at a high and it's not just driven by commodity prices, if we strip those out, the rest of the market is actually seeing an increase. The P/E of the market has moved from 20x at the end of 2020, back to 15.8x now which is only slightly above historical averages, and certainly not scary.
The ASX200 kicked off April with a very small decline basically ignoring a 550-point drop by the Dow in the process, after another bullish week all-time highs are now less than 2% away! Over the last 10-years the average gain for April, usually the 2nd strongest month of the year, is +2.7% which would take us to a new milestone high – MM’s call since the start of 2022 with the “fun” just about to start in earnest. With one trading day of Q2 behind us let’s re-consider what may be coming over the next 3-months:
The ASX200 enjoyed another strong week to take March’s rally to over 5%, under the hood a mixed bag of Utilities, Resources and IT stocks all enjoyed strong moves while the banks remained supportive of the index. As we slowly but surely edge towards fresh highs MM expects volatility to increase on the stock level as fund managers pick out different names they believe have run too hard but we feel the general absence of sellers will remain and could April deliver some reversion on the stock / sector level as investors take profit on the top performers while chasing value in names which look ready to play some catch up. The variance has been huge across the board as we approach the end of Q1 of 2022:
The ASX200 shrugged off a number of headwinds last week including a Fed rate hike, hawkish comments from Jerome Powell, rising COVID numbers, a decent pullback in commodities and ongoing geopolitical worries surrounding Russia’s invasion of the Ukraine conflict including concerns that China will eventually mover to support Putin. Local stocks simply wanted to rally and nothing was going to stand in their way with the main index eventually closing up 231-points / 3.3%. MM continues to beat the same drum and importantly the rhythms playing out:
The ASX200 experienced a very mixed week depending which stocks / sectors investors held although again the index traded in a tight range ultimately closing down less than 1%. Following some panic moves across commodity markets we saw some aggressive profit taking in the space later in the week but fortunately, for the health of the local index, we saw the hugely influential Financial Sector rally 2.2% noticeably outperforming the Materials Index which finally ended the week down 3.4%. Some of the recent volatility in the commodities space is almost beyond panic and comprehension, even considering the war in the Ukraine:
The ASX200 danced a similar jig to last week by looking good on Thursday morning only to unravel through Friday as the inconceivable crossed the newswires - Russian forces had shelled Europe’s largest nuclear power plant in Southern Ukraine setting it ablaze and leaving onlookers considering another Fukushima disaster. It’s very easy to comprehend the markets rising concerns when the New York Times ran a headline that an explosion would be the end of Europe – Vladimir Putin playing an extremely scary game that may still force the West to intervene.
The ASX200 was looking good on Wednesday before the news wires screamed out that Russia had started to invade the Ukraine, we all hoped and prayed it would never happen but Putin obviously has an agenda well beyond the understanding of normal folk. All we know for sure the big loser will be the average person on the street, innocent people are starting to die under the influence of plain stupid power & ego – we’ve seen it before and unfortunately we’ll probably see it again.
The ASX200 again fell 1% on a Friday, it’s becoming an end of week habit! Its very easy to understand why investors / traders were scared to go home exposed this weekend as Monday is Presidents Day in the US making it a 3-day weekend for stocks i.e. plenty of time for further escalation of geopolitical tensions around the Ukraine. You could actually feel the realisation kick in at 3.30pm yesterday, the ASX was holding up really well considering previous falls on overseas bourses but in the last half an hour we succumbed to nerves and dropped almost 50-points to forgo the week’s gains.
The ASX200 fell 1% on Friday as concerns around inflation and rising bond yields again came to the fore as the US CPI (inflation) hit a 40-year high providing ammunition for some hawkish economists to forecast a full 1% interest rate increase by the Fed over the next 3-months. As we’ve said repeatedly over the last 18-months interest rates are going higher, the only question is how fast and the markets have now positioned themselves for an aggressive & fast series of hikes. However not everything was bad news for stocks and there are some fascinating scenarios unfolding on the stock / sector level:
The second weak of April saw consolidation at the index level with the ASX closing the week 0.20% lower, a positive outcome really given the continued headwind from rising rates into a market that is just 2% below all time highs.
However, when we stand back and look at earnings, the most important driver of stocks over time, the profile of the ASX has been picking up thanks in part to higher commodity prices and in particular, plenty of upgrades in the Lithium space. While some question the strength of the market, earnings are also at a high and it's not just driven by commodity prices, if we strip those out, the rest of the market is actually seeing an increase. The P/E of the market has moved from 20x at the end of 2020, back to 15.8x now which is only slightly above historical averages, and certainly not scary.
The ASX200 kicked off April with a very small decline basically ignoring a 550-point drop by the Dow in the process, after another bullish week all-time highs are now less than 2% away! Over the last 10-years the average gain for April, usually the 2nd strongest month of the year, is +2.7% which would take us to a new milestone high – MM’s call since the start of 2022 with the “fun” just about to start in earnest. With one trading day of Q2 behind us let’s re-consider what may be coming over the next 3-months:
The ASX200 enjoyed another strong week to take March’s rally to over 5%, under the hood a mixed bag of Utilities, Resources and IT stocks all enjoyed strong moves while the banks remained supportive of the index. As we slowly but surely edge towards fresh highs MM expects volatility to increase on the stock level as fund managers pick out different names they believe have run too hard but we feel the general absence of sellers will remain and could April deliver some reversion on the stock / sector level as investors take profit on the top performers while chasing value in names which look ready to play some catch up. The variance has been huge across the board as we approach the end of Q1 of 2022:
The ASX200 shrugged off a number of headwinds last week including a Fed rate hike, hawkish comments from Jerome Powell, rising COVID numbers, a decent pullback in commodities and ongoing geopolitical worries surrounding Russia’s invasion of the Ukraine conflict including concerns that China will eventually mover to support Putin. Local stocks simply wanted to rally and nothing was going to stand in their way with the main index eventually closing up 231-points / 3.3%. MM continues to beat the same drum and importantly the rhythms playing out:
The ASX200 experienced a very mixed week depending which stocks / sectors investors held although again the index traded in a tight range ultimately closing down less than 1%. Following some panic moves across commodity markets we saw some aggressive profit taking in the space later in the week but fortunately, for the health of the local index, we saw the hugely influential Financial Sector rally 2.2% noticeably outperforming the Materials Index which finally ended the week down 3.4%. Some of the recent volatility in the commodities space is almost beyond panic and comprehension, even considering the war in the Ukraine:
The ASX200 danced a similar jig to last week by looking good on Thursday morning only to unravel through Friday as the inconceivable crossed the newswires - Russian forces had shelled Europe’s largest nuclear power plant in Southern Ukraine setting it ablaze and leaving onlookers considering another Fukushima disaster. It’s very easy to comprehend the markets rising concerns when the New York Times ran a headline that an explosion would be the end of Europe – Vladimir Putin playing an extremely scary game that may still force the West to intervene.
The ASX200 was looking good on Wednesday before the news wires screamed out that Russia had started to invade the Ukraine, we all hoped and prayed it would never happen but Putin obviously has an agenda well beyond the understanding of normal folk. All we know for sure the big loser will be the average person on the street, innocent people are starting to die under the influence of plain stupid power & ego – we’ve seen it before and unfortunately we’ll probably see it again.
The ASX200 again fell 1% on a Friday, it’s becoming an end of week habit! Its very easy to understand why investors / traders were scared to go home exposed this weekend as Monday is Presidents Day in the US making it a 3-day weekend for stocks i.e. plenty of time for further escalation of geopolitical tensions around the Ukraine. You could actually feel the realisation kick in at 3.30pm yesterday, the ASX was holding up really well considering previous falls on overseas bourses but in the last half an hour we succumbed to nerves and dropped almost 50-points to forgo the week’s gains.
The ASX200 fell 1% on Friday as concerns around inflation and rising bond yields again came to the fore as the US CPI (inflation) hit a 40-year high providing ammunition for some hawkish economists to forecast a full 1% interest rate increase by the Fed over the next 3-months. As we’ve said repeatedly over the last 18-months interest rates are going higher, the only question is how fast and the markets have now positioned themselves for an aggressive & fast series of hikes. However not everything was bad news for stocks and there are some fascinating scenarios unfolding on the stock / sector level:
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