Last week saw the ASX200 whacked over 300-points or -4.2% as we edged under Mays low into the close on Friday, if we see a downside swing this month similar to those through April and May a test below 6800 feels inevitable over the coming few weeks – perhaps even on Monday! Unfortunately the markets feeling a little like a row of dominos at the moment, firstly we saw the undisputed bursting tech / growth bubble, this was followed by the battery names on June the 1st and then last week the influential banks joined the bear party, will the resources be next? As we said on Friday this was the worst week in 2-years and it certainly felt like it as the attention of the sellers was refocused to some previously strong names / sectors, a few that caught our attention:
Last week saw the ASX200 manage to extend its recovery to 3 consecutive weeks albeit in a “2-steps forward, 1-step back” manner with a strong performance by the resources offset losses by a tired Banking Sector. We are starting to see some stock / sector reversion creep into the market as we approach the EOFY although the tech stocks still haven’t found any buyers as they fail to enjoy any semblance of a recovery i.e. it was another very targeted “risk on” week.
While it certainly didn’t feel like it at times the ASX200 has managed to advance for 2 consecutive weeks aided by strong moves by the banks and resources, arguably the backbone of the Australian market. The index may be sitting ~6% below its late 2021 all-time high but the performance from a number of the market heavyweights is far more impressive:
The ASX200 finally ended another choppy and nervous week on the front foot with the index closing up +1.15% on Friday helping it to a +1% gain, its first weekly advance since April, overall an excellent performance considering the aggressive plunge on Thursday. The tech stocks finally attracted some buyers with a number of major sector names such as Altium (ALU), Technology One (TNE), NEXTDC (NXT) and Xero (XRO) all bouncing over 5% for the week.
The ASX200 ended an extremely tough week with some bargain hunting finally emerging on Friday which helped the index bounce strongly to close almost 2% higher, basically halving the week’s losses in the process. The story under the hood of the ASX has been fairly consistent throughout both May and 2022, high valuation / tech stocks have been hammered as bond yields scale multi-year highs courtesy of surging inflation. However when we have enjoyed positive days it has largely been driven by the same stocks springing back with a vengeance:
The ASX200 endured an abysmal Friday which finally saw the index close down -2.2%, the session saw only 6% of the main board manage to close in positive territory, conversely the same number of stocks fell by over -7%! There was nowhere to hide from the relentless selling with companies who reported being treated very harshly, even when the numbers like Macquarie’s (MQG) looked ok. To put the end of the weeks drop into perspective it was the local markets largest one day decline since Russia invaded the Ukraine back in February.
The ASX200 fought valiantly on Thursday / Friday to end the week down less than 1% with Fridays strong 78-point recovery taking the index back well above 7400, the market actually popped 10-points in the match to close on its high for the day and yet again find ourselves within striking distance of a fresh all-time high. The index has now spent 13-months rotating between 6750 and 7625, perhaps the infamous May will see a move to a fresh equilibrium although history would favour the bears.
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:
Last week saw the ASX200 manage to extend its recovery to 3 consecutive weeks albeit in a “2-steps forward, 1-step back” manner with a strong performance by the resources offset losses by a tired Banking Sector. We are starting to see some stock / sector reversion creep into the market as we approach the EOFY although the tech stocks still haven’t found any buyers as they fail to enjoy any semblance of a recovery i.e. it was another very targeted “risk on” week.
While it certainly didn’t feel like it at times the ASX200 has managed to advance for 2 consecutive weeks aided by strong moves by the banks and resources, arguably the backbone of the Australian market. The index may be sitting ~6% below its late 2021 all-time high but the performance from a number of the market heavyweights is far more impressive:
The ASX200 finally ended another choppy and nervous week on the front foot with the index closing up +1.15% on Friday helping it to a +1% gain, its first weekly advance since April, overall an excellent performance considering the aggressive plunge on Thursday. The tech stocks finally attracted some buyers with a number of major sector names such as Altium (ALU), Technology One (TNE), NEXTDC (NXT) and Xero (XRO) all bouncing over 5% for the week.
The ASX200 ended an extremely tough week with some bargain hunting finally emerging on Friday which helped the index bounce strongly to close almost 2% higher, basically halving the week’s losses in the process. The story under the hood of the ASX has been fairly consistent throughout both May and 2022, high valuation / tech stocks have been hammered as bond yields scale multi-year highs courtesy of surging inflation. However when we have enjoyed positive days it has largely been driven by the same stocks springing back with a vengeance:
The ASX200 endured an abysmal Friday which finally saw the index close down -2.2%, the session saw only 6% of the main board manage to close in positive territory, conversely the same number of stocks fell by over -7%! There was nowhere to hide from the relentless selling with companies who reported being treated very harshly, even when the numbers like Macquarie’s (MQG) looked ok. To put the end of the weeks drop into perspective it was the local markets largest one day decline since Russia invaded the Ukraine back in February.
The ASX200 fought valiantly on Thursday / Friday to end the week down less than 1% with Fridays strong 78-point recovery taking the index back well above 7400, the market actually popped 10-points in the match to close on its high for the day and yet again find ourselves within striking distance of a fresh all-time high. The index has now spent 13-months rotating between 6750 and 7625, perhaps the infamous May will see a move to a fresh equilibrium although history would favour the bears.
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:
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