Viewpoint: Bullish
The $US made fresh 6-month lows last week taking its correction to ~10%, the currency has taken its lead from bond yields as opposed to the Fed’s hawkish rhetoric. As we’ve discussed over the last few months investors/traders have been positioned very long in the $US hence its recent sharp correction but we believe this is starting to become extended and a period of consolidation is on the menu into 2023.
European equities, like their US and Australian peers, struggled last week but this is a dangerous time to be bearish and another push by the FTSE towards this year’s high, only 4% away, wouldn’t surprise.
Last week saw US equities surrender some of their recent +17.4% gain after the Fed ended hopes that we would enter 2023 with dovish optimism from Jerome Powell et al.
The ASX200 has now slipped -3.5% from its high at the start of December, it feels worse but the move is no more than normal market noise which arguably has been relatively tame when we consider the recent activity by central banks.
We recently reduced our position in nickel & lithium company IGO from 5% to 3% and if anything we are still more of a seller of strength than a buyer of weakness. This company has evolved impressively since the acquisition of Western Areas (WSA) & deal with Tianqi Lithium but after its more than 5-fold appreciation post-Covid, there’s clearly a lot of good news built into the stock.
We recently reduced our position in BHP from 9% to 6% as the Big Australian knocked on the door of its resistance/sell area for the 4th time post-Covid. This is undoubtedly a great company but if commodity prices struggle under the weight of a global recession this stock is likely to follow in the downdraft.
We recently trimmed our position in copper miner SFR but we are still holding over 4% following the allotment of our entitlement rights yesterday which are now available for trade today. Similar to Goldmans we are bullish copper looking out over the coming years but some short-term weakness wouldn’t surprise us for reasons mentioned previously – we may take our position back above 5% if weakness unfolds into 2023.
REA hasn’t moved since our purchase in mid-September however we still believe the outlook is solid for the business, especially after it managed to push through a national price rise of 6% providing support during a challenging period for Australian property. Similarly, the owners of investment properties have largely pushed on the pressures of rate…
NAB has been on our radar for weeks and after the impressive result from Bendigo Bank (BEN), we believe it’s time to take our banking exposure back towards market weight. We particularly liked BEN’s leverage to higher cash rates which produced better margins across their book, and it now appears this environment will be here for longer…
The ASX200 struggled again yesterday taking the market into negative territory for the week as weakness crept into the previously strong Resources Sector. The market has felt heavy over the last few weeks but at this stage, we’re still only -2.3% below the market’s recent high, very surmountable if we can regain our mojo after recent moves…
