Viewpoint: Bullish
Crude oil is challenging the top end of our projected target area with supply chain disruptions intensifying as Russia wages war with the Ukraine, we continue to look for a period of consolidation but clearly picking a top with the backdrop of war is a tough gig.
Much of the financial headlines over recent weeks have been around commodity prices as the Ukraine invasion compounds already weak supply dynamics across many market sectors from wheat to coal and of course crude oil. MM is sticking with our 2 major macro calls moving forward:
The “Little Aussie Battler” has been a standout performer over recent weeks embracing surging commodity prices, not surprisingly the Canadian Dollar, or “Looney”, has also held strong against an extremely strong Greenback over recent weeks. We remain bullish the $A although in todays volatile world its hard to know what the catalyst (s) will be to drive it through the psychological 75c region.
US stocks remained relatively firm last week even as the Ukraine crisis deteriorated before our eyes, we cannot rule out another savage dip down towards the 4000 level by the S&P500 but if we do see such a plunge, aka Europe, we are a buyer for a strong bounce at least.
The ASX200 managed to close higher in the face of East European hostilities but the meaningful gains were again delivered by the Energy, Gold and broad based Resources Sector. MM remains optimistic towards equities but as we’ve already witnessed through January and February that its likely to be all about sector rotation and MM’s looking to migrate away from the Resources Sector during…
US stocks chopped around overnight as they weighed up the ongoing implications of the Ukraine invasion with domestic inflation concerns following oils surge well above $US100/barrel. Economically the US saw business activity soften due to ongoing supply chain disruptions while jobless claims retreated as COVID restrictions ease i.e. a mixed bag which was reflected in the uncertain moves by equities.
OZL has at times felt like our underperforming copper exposure, equivalent to Santos (STO) in the oil / gas sector i.e. OZL has corrected over 19% from its 2022 high when copper simply rotated in its fairly tight 12-months range. However the industrial metal has come back to life this week rallying ~7% suddenly finding itself within striking distance of our medium-term $US500/lb target i.e. now only another 5% away.
WHC +10.61%: Rallied hard today as did the other coal related stocks following a huge spike higher overnight, Newcastle Coal Futures for April +46% in a move that seems a clear anomaly, however those sorts of moves typically play out in a market that is very tight, and getting tighter. While Russia is a key coal supplier (about 15% of European demand), it’s not just a geological issue, the market was getting squeezed from a bunch of different directions over the past year or so;
We have looked at Woolworths (WOW) over recent weeks as it corrected over 20% but on balance we actually prefer rival COL around the current $17.50 area after the markets positive reaction to its 1st half result in late February.
Market heavyweight Apple has already bounced 10% from last weeks low and technically we can see fresh all-time highs in the coming months, it would need such a move for MM to consider trimming our holding but in today’s market we shouldn’t forget MM’s mantra for 2022/3 – “buy weakness and sell strength with the emphasis on the later”.
