The ASX200 keeps climbing the wall of worry, the 6700 magnet is threatening to pass its mantle onto the new 6800 handle and on Friday we closed less than 6% below 2020’s all-time high. The rate of ascent has diminished as the buyer’s appetite for different stocks / sectors rotates almost daily while the underlying index sets its sights on 7000, but it appears in no hurry to reach the next major psychological level. Already in 2021 while the index has ground out a ~3% gain we’ve seen 27 stocks rally by over 8% and 15 stocks fall by the same degree with some interesting names on both sides of the respective ledger:
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.
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.
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