Viewpoint: Bullish
The last month has seen the ASX200 rally less 3% but the tech stocks have soared, happily including our positions, conversely as discussed earlier the resources have fallen away after a stellar 2021 to-date e.g. OZ Minerals (OZL) -14%, BHP Group (BHP) -4% and Alumina (AWC) -8%.
However the $US is offering a slightly contradictory picture, we believe the greenback has enjoyed only around half of its likely recovery after falling ~14% from its COVID panic high. Assuming we are correct here the implication is tech should outperform a bit further into the new Financial Year although the “easy money” is already behind us.
No change with US stocks which have basically gone nowhere on the index level for around 2-months, similar to the ASX sector rotation continues to dominate proceedings while the underlying broad index remains within 1% of its all-time high i.e. investors are remaining committed to stocks but continually evolving which market pockets they want to hold overweight exposure.
The Resources Sector fared noticeably better than the banks yesterday with the likes of mining giants RIO and BHP now only a few percent away from our initial targeted buy zones.
MM recently reduced our CBA and NAB positions above yesterdays close with an eye on buying BOQ using a limit of $8.50, a move that’s colloquially termed in the markets as “lifting a leg in the air”, the move was looking pretty average until yesterday’s falls but we remain optimistic.
The ASX200 followed Fridays weak lead from global indices finally closing down -1.8% with the heavyweight Banking Sector surrendering some of their recent impressive gains, it felt like a session of aggressive profit taking with the stronger performers over the last 3-months suffering the most e.g. Commonwealth Bank (CBA) fell -5.4% after rallying over +15% over the last 3-months.
The local tech sector has recovered solidly over the last 5-weeks and we remain bullish targeting at least another 10% upside hence any buying of the Resources Sector into weakness might initially be funded by cash as opposed to selling some of our tech holdings.
The “Fear Index” woke up from its slumber on Friday as the Dow fell away finally closing up 17% on the day, albeit from very low levels. We are only looking for a ~7% downside from the S&P500 hence another test of the 30 area is likely to cap any rally in the VIX, unless of course it happens in a panic 24-48 hour style move.
The last few months has seen some significant outperformance by the IT Stocks when compared in particular to the resources, a move which has coincided with the fall away in longer dated bond yields e.g. over last month
The US S&P500 has basically gone nowhere since April and on balance it feels like its due a pullback to simply washout any weak longs – at this stage a decent dip under 4000 will see MM start buying especially for our cashed up International Equities Portfolio.
