Viewpoint: Bullish
The ASX200 fought valiantly on Tuesday to finally close up +0.4% on tentative buying and a strong lead from US Futures during our day session however it needed a bounce by the Resources & Energy Sectors to lift the nervous market which still saw the losers outnumber the winners. As subscribers know we increased our exposure to stocks yesterday – I apologise to anyone who didn’t receive the SMS notification, we’re confident this issue will be resolved by Friday:
My Bloomberg terminal is filled with bears, Blackrock says we should shun most stocks as the market is simply not pricing in a recession and a ‘hard landing’ sort of scenario while Goldman Sachs has downgraded equities to underweight in their asset allocation matrix, a similar move made by Shaw’s Chief Investment Officer a few days ago, saying that evidence that inflation is becoming persistent means higher interest rates, tightening financial…
GMG made fresh 2022 lows yesterday in a very similar fashion to Seek, this is a quality business in our opinion that has been re-rated due to rising interest rates and negative sentiment towards the property sector as a whole. MM reduced our exposure to the stock into Augusts strength believing this downside swing was a definite possibility, in hindsight, we should have sold…
In similar fashion, REA rallied +3.5% yesterday after opening the session lower, one day’s reversal doesn’t constitute a change in trend but when it dovetails into our roadmap for equities MM gives the advance far more credibility.
MP1 rallied +3.6% yesterday in line with a bounce by tech stocks even as bond yields rallied which suggests to MM that investors believe value has returned to the sector even as interest rates look likely to be higher for longer.
Seek has been our “pet stock” when it comes to picking a market turn and on cue yesterday it made a fresh 2022 low before reversing higher i.e. we believe this stock has now made or is looking for an important low.
US stocks tried to rally from their June lows yesterday but the weight of bad news was too much to entice buyers from their sanctuary of cash in any sustainable fashion – traders are apparently now sitting on a massive $US5 trillion in cash, its this very cash which MM believes will ultimately propel stocks higher into Christmas in very similar manner to the advance from June into August.
CBA rallied yesterday and although no banks managed to close up on the day they did close well off their lows. The banks have looked relatively firm over recent weeks as “3 of the big 4” are set to trade ex-dividend in November, we are now entering the sector’s strongest period from a seasonal perspective.
Our road map for bonds & equities remains on track into Christmas with investors’ resolve being tested as the economic news gets more challenging by the day. However we must remember for the local index to test its June low and bonds yield to make fresh post COVID highs the news always needed to be challenging, and the bulls could easily argue that considering what’s been thrown…
Markets have clearly lost confidence in stocks over recent weeks although as we keep saying a pullback to, or below, Junes lows has been on the MM roadmap into 2023 hence for now we remain bullish looking for a Christmas squeeze back towards last month’s highs, in some regards, it doesn’t sound a big call but it certainly feels like it this morning!
