Viewpoint: Bullish
As we all know, iron ore has been the big loser in recent months not helped by the collapse of China Evergrande (3333 HK) however MM now believes the next 20% move is likely to be a countertrend bounce which should help the likes of BHP & RIO which will also help the ASX make fresh all-time highs.
Crude oil has started to dominate the financial news as it grinds ever higher fuelling major inflation fears in the process – petrol in Sydney at a number of stations has popped over $2 a litre. At MM we expect higher prices well into 2022, hopefully we see the local Energy Sector finally believe in the move, the likes of Santos (STO) remain below their June high basically…
Australian 3-year bonds have surged towards 1% through October but the RBA drew a line in the sand on Friday by buying $1bn worth of bonds in aggressive fashion to reassert its assurances that rates wont rise until 2024 – a big call but mortgage holders should be happy! This clear signal that the RBA is prepared to defend its target suggests that yields have run too hard too fast and we have tweaked our view back down to mildly bullish from current levels, at least into Christmas.
No real change as global bond yields have continued to rise from their late August low as inflation picks up momentum, although after more than doubling in just a few weeks I wouldn’t be surprised to see the US 2-years take a rest on the upside. This morning well respected previous Fed Chair Janet Yellen said she expects inflation to remain strong…
The influential US Tech sector continues to advance in a constructive if not overly explosive fashion. After dismissing inflation & bond yield fears without any major furore we still expect at test of the psychological 16,000 area into Christmas.
The US small cap Russell 2000 index has now traded in a tight range since mid-January, surely somethings got to give! We’re siding with the seasonal statistics looking for new highs into Christmas with an initial target area 6-8% higher but calling follow through in either direction has proved frustrating over the last 9-months.
No real change, the ASX200 continues to grind higher with different sectors taking it in turns to undertake the heavy lifting while any sustained / meaningful selling remains conspicuous by its absence.
JBH has also corrected over 20% dancing in almost perfect tandem with HVN as concerns towards the medium-term macro picture continue to hang over the market and sector. Similar to HVN we can see over 20% upside into 2022 and with a projected yields above 6% its extremely hard to pick between the two.
When we cast our eyes to US retailers the picture has been more positive with the pull back much shallower and today they’re back within a couple of good days of fresh highs. The implication is the domestic issues are weighing on our market but all of the 4 points mentioned earlier also apply to the US suggesting the local investors have become a touch too nervous & / or conservative.
Australia is exiting lockdown with a huge degree of optimism yet the retail stocks have struggled since August correcting around 15% in the process, conversely the ASX200 sits less than 3% below its all-time high. We see a few contributing factors at play:
