Looking at the very short run, it would appear we’ve had a lift in sentiment, risk appetites (higher equities, lower spreads) against a backdrop of monetary policy tightening (higher yields, reals, FX), and perhaps some moderation of negative spill-overs from Ukraine/Russia.
That mix is perhaps a tad unusual, but markets vary, and can do what they like in the short run. The test of sentiment in the face of quite substantial tightening will be where reals wind up. At -.51 they are still highly accommodative. +.51 is likely to be another matter.
…as is the implication from an inverted yield curve.
The challenge with commods is that whilst current pricing is not sustainable, especially if reals go much higher, the yield/carry/valuation metrics at these prices continue to rip your face off if you are substantially UW.
Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.
This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.
Please note that past performance is not a reliable indicator of future performance.
General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.
Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.