Viewpoint: Bullish
US bond yields edged higher overnight with the longer dated names exhibiting more underlying strength as the 2-years surrendered most of their early gains – we believe this yield curve move will continue for a while.
US stocks experienced another mixed session overnight as short-term bond yields edged higher exerting pressure on the large tech names, conversely the energy and financial stocks were firm supporting the Dow in the process.
MGR caught my attention yesterday soaring 5%, significantly outperforming its peers in the process, there was no specific news perhaps fund managers were simply reacting slowly to last week’s AGM. The stocks looking / feeling good in our opinion and a pop above $3.20 wouldn’t surprise i.e. around 15% higher – this makes the stock attractive to MM…
WPL has been a major market and sector underperformer post COVID, this deal with BHP when combined with our positive energy outlook into 2022 has switched us to a bullish stance for WPL targeting a test of its January high, it really feels like a case of now or never for this $21.8bn energy goliath.
MM switched from batteries materials focused IGO Ltd (IGO) yesterday to iron ore producer Fortescue Metals (FMG) – undoubtedly selling strength and buying weakness, let’s hope our timing proves correct. However today we’ve focused on fellow iron producer BHP, albeit with a healthy diversified smorgasbord of resources under its belt. The “Big Australian”…
The ASX200 sprang back to life yesterday with the Banks and heavyweight iron ore names combining to send the index up 0.8%, finally closing right back in the middle of the last 5-weeks trading range. Complacency can be the enemy of a successful investor and it’s our opinion that after consolidating for a very similar 3-month period to this time last year the likelihood of a…
I was mildly surprised to see the reaction by the $US, short-dated bond yields and the subsequent knock on effect on gold etc after Joe Bidens decision although they were in the direction of the underlying trend through 2021 and as we know surprises usually unfold with the trend. Again we wouldn’t be chasing US bond yields at current levels but if we see another…
US stocks faltered overnight as the prospect of earlier rate hikes weighed on the influential tech stocks, it was always a case of when not if rates were going higher so I cant see this being taken as overly fresh news. The trends up and strong hence we see no reason to change our “buy the dip and fade the pop” stance i.e. at this stage we wouldn’t be chasing new…
QAN has now corrected 12% as the COVID picture deteriorates in Europe and tourism in general recovers slower than many of us hoped. At this stage we remain positive QAN but I am happy that its currently MM’s only exposure to the travel and tourism industry, it may take a while before optimism returns to this sector.
The ASX200 tumbled 0.6% yesterday as the banks led the broad market lower, there were a few bright pockets amongst the 30% of stocks which managed to close higher with the lithium and nickel names the standouts for me. Iron ore names are slowly getting up from the canvas on news of China easing but the tourism stocks came under distinct pressure as a number of European countries languish under an ever worsening COVID 4th wave plus yesterday evening saw Air New Zealand being been forced to cancel 1000 trans-Tasman flights due to border restrictions undoubtedly changing the plans for thousands of families for Christmas in the process.
Germany, the Netherlands and Austria are facing harsh lockdown restrictions as the countries endure an accelerating number of COVID cases across these countries who’ve only achieved average vaccination rates – the onset of winters not helping matters.
The cyclical nature of markets never ceases to amaze me, its was only a few weeks ago that bond yields surged as higher than expected inflation data surprised analysts in many regions. The message from financial markets and the RBA was very different:
Money markets have been targeting 3-4 rate hikes in 2022 while the RBA said they don’t anticipate raising rates until 2023 at the earliest.
Interestingly I noticed yesterday afternoon that St George Bank had subtly dropped their fixed 3-year mortgage rate on Monday –the inflation panic may have been a touch too premature.
Remember we’ve mentioned a few times over the last fortnight that US growth stocks had impressively ignored bond yields, perhaps they were just smarter!
Jerome Powell got the nod from Joe Biden overnight to head the Fed for another term which sent stocks and short-term bond yields higher, markets are now looking to June for the start of rate hikes but equities initially appeared relieved by the lack of surprises / unknown. Obviously this timetable could again be delayed if COVID continues to disrupt the economic expansion across the northern hemisphere.
The underperformance by Australian stocks has been apparent since the COVID recovery commenced back in March 2020, primarily due to our lack of “Big Tech” however it’s become more pronounced over the last 6-weeks and although its easy to explain the whys and wherefores due to the banks and iron ore names, history tells us that when elastic bands stretch too far they have a habit of snapping back fast & hard, lets hope the time is nigh.
US stocks were mixed overnight after an aggressive late sell-off, earlier in the session all major indices registered fresh all-time highs following President Bidens decision not to rock the boat and stick with Jerome Powell as Fed Chair. However, the anticipated rate hikes from mid-2022 saw profit taking hit the tech based NASDAQ, news that the Woodside-BHP $41bn merger was set to proceed looks to have been the catalyst to send BHP Group (BHP) up strongly overseas which should help the local index only open a touch softer this morning…
