Viewpoint: Bullish
No real change as global bond yields continued to rise from their late August low as inflation spikes, the standout has been the ongoing contraction of the yield spread which can be simply interpreted as follows:
European equities fell just short of making fresh all-time highs on Friday, we still see another 5-6% upside short-term for the region which is a reassuring sign for local stocks who are usually more correlated to these indices as they have a lower percentage component of big tech.
The broad based US S&P500 posted record highs yet again on Friday, a very regular statement over the last 18-months. MM’s initial target for this current leg higher has been the 4650-4700 region hence since we are only 1-2% away we have dialled back our stance to mildly bullish but importantly the trends up and surprises do usually unfold with the trend.
No major change, we are bullish the ASX200 looking for fresh highs although it’s a touch disconcerting to see the likes of the US & European stocks already achieving our targets while we walk a clearly nervous path – lets hope the banks can perform their usual heavy lifting through November.
This is not the first time we’ve mentioned TLS this week, the company has a significant portion of its valuation tied up with the NBN and the agreement is linked to inflation i.e. the income stream will rise with inflation.
Apple shares illustrate perfectly how growth stocks can become unnerved by rising bond yields but interestingly at this stage even though the moves in money markets have been dramatic stocks have basically ignored the shenanigans – as we often say don’t fight the tape, while growth stocks shrug off the likelihood of higher interest rates MM is relaxed…
Caterpillar the world’s largest mining & construction equipment manufacturer reported both strong 3rd quarter earnings and ongoing solid demand into 2022 illustrating the economies resilience even as it deals with supply chain problems – analysts expectation were for adjusted quarterly profit of $2.20 per share but CAT trumped this with a $2.66 print. The largest…
Overnight US stocks enjoyed another strong session making fresh highs along the way, our initial target for the current advance is around the 4650-4700 area, only a few percent higher. The market continues to absorb theoretically bad news as the bull market marches on, fighting strong trends is usually an expensive game – its proving to be for the bears in today’s market.
The Australian building stocks jumped out of the blocks yesterday after Boral (BLD) delivered a healthy Q1 trading update at its AGM. The net outcome was things weren’t too bad through COVID and the outlook for 2022 is solid. Elsewhere in the sector we saw gains for CSR Ltd (CSR), James Hardie (JHX) and Fletcher Building (FBU). We are long CSR targeting fresh 2021 highs, or another 10-15% upside.
Yesterday saw ANZ deliver a solid result with cash profit up to $6.5bn aided by previous over provisioning for bad debts i.e. things haven’t been too bad through COVID. They’ve struggled to grow home loans over the last 12-months but that might not be a disaster if rates surge next year. Costs were a tad higher but nothing too disturbing and overall…
