Viewpoint: Bullish
The British Pound is dovetailing nicely towards our core macro view which suggests a continuation of the bearish trend for the $US and higher commodity prices / bond yields i.e. implying the Delta Strain is only another bump in the road of ongoing solid economic growth.
The US VIX Index, or “Fear Index” continues to tread water but around current levels we still feel the path of least resistance is up although patience is again clearly required.
Most major US indices again made fresh all-time highs last week before retreating and finishing off the week marginally lower, in similar fashion to the ASX. The risk / reward isn’t exciting at current levels following the S&P500’s impressive 38% rally in less than a year, we’re more comfortable adopting a patient stance at least for the…
Australian bond yields continued to test multi-month lows last week as the Delta strain dampened economic optimism, it’s hard to imagine an improvement short-term but again we must remember major lows are often formed when things look their worse plus importantly MM has been calling this fall away in bond yields for months with the intention of establishing a bullish yield view across our portfolios:
The ASX200 waved goodbye to July in lacklustre fashion on Friday, the first month of FY21/22 only managed to travel a meagre 79-pints / 1.1% to ultimately close down just 2-points, it felt like a quiet choppy almost “nothing like” month and ultimately that’s exactly what it was on the index level although there were a view interestingly developments unfolding beneath the hood:
WZR Flat: Released their quarterly trading update yesterday (we missed covering) and it was strong. 4Q21 sales were up +234% from $2.9m in pcp to $9.7m which was slightly above our expectations. This takes FY21 unaudited sales to ~$27.2m which is solid while 90-Day arrears remained very low at 0.92% with the average credit score at 780 vs. 771 in the previous period.
ING came out with an earnings upgrade in May which appeared to catch the short sellers resulting in a ~30% appreciation in just a few weeks. We like this business and its almost 4% fully franked yield, we could comfortably be long with 10% stops.
Agricultural goods & services business ELD has enjoyed a good couple of years but again like many ASX stocks its struggled after posting fresh all-time highs, this time in April. The company has a number of promising tailwinds behind it with the main question being have the shares pre-empted too much of the potential news.
MM is long the DBA ETF in our Global Macro Portfolio, an ETF which tracks 11 of the most prominent agricultural commodities which by definition has strong correlation to underlying food prices. Hence the macro backdrop towards food stuffs and by definition inflation is bullish into 2022, this dovetails nicely with our core reflation view moving into 2022 and beyond.
I’ve noticed a number of MM subscribers are becoming increasingly nervous around the COVID outbreak in Sydney, makes sense, I know I am – this school terms basically gone and the Gerrish household is already becoming increasingly anxious around the next one! One narrative that comes to mind towards defensive investing is “we all have…
