The ASX200 had a very quiet 2nd week of December finally closing up just +0.1% after posting fresh 10-month highs on Wednesday. Although the market has rallied strongly for an impressive six consecutive weeks it feels a little tired, it’s amazing how often the much-publicised seasonality influences are almost self-fulfilling - “fund managers make sheep look like independent thinkers”, a gem of a saying from Joe Bo who sits on our institutional desk at work and has a strong arsenal of one liners. We wouldn’t be surprised to see the local index correct a few percent next week, perhaps on lessening optimism around the COVID vaccines, but MM remains bullish and will consider increasing risk into any pullback – at least this side of Christmas. The “Santa Claus Rally” theoretically should start sometime next week and while 2020 has most definitely not been a normal year its already getting close to now or never for this seasonal bullish phenomenon.
The stock / sector rotation in the both US & Australian markets remains at extreme levels, we continue believe the way to add value (alpha) in the current market is through switching as opposed to simply increasing / decreasing cash levels, or market exposure. However investors should always remember all good things do eventually come to an end, we can see ourselves increase cash holdings across the portfolios at some stage before Christmas, ideally the NASDAQ shown below will regain its “mojo” and test / break its all-time high in October following its classic 14% washout of the “weak longs” and increasing number of momentum traders.
MM believes that the RBA and government will over stimulate the Australian economy in the years ahead sending inflation above 3% , a move that bond yields will undoubtedly follow.
MM remains very bullish the Resources Sector into 2021.
The stock / sector rotation in the both US & Australian markets remains at extreme levels, we continue believe the way to add value (alpha) in the current market is through switching as opposed to simply increasing / decreasing cash levels, or market exposure. However investors should always remember all good things do eventually come to an end, we can see ourselves increase cash holdings across the portfolios at some stage before Christmas, ideally the NASDAQ shown below will regain its “mojo” and test / break its all-time high in October following its classic 14% washout of the “weak longs” and increasing number of momentum traders.
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