Market movements over the past month.
For the most part, a reversal of December.
Positive inflation data (returning to trend, or at least, cooperating, and moving substantively in the right direction) alongside the ongoing China reopening story, drove markets.
Additionally, the material decline in natural gas and energy costs, has underpinned European and emerging market equities, where the energy crisis has been most pronounced.
Commodity prices ex natural gas have moved accordingly, including gold, and yields have climbed modestly from ~3.30% to 3.5%, although they are, on net, down from near 4% over the month, given the inflation moderation.
Despite the phenomenal run of resources, the past decades + worth of risk adjusted returns continue to compel us to maintain a relatively modest total exposure, on a long run basis (in other words, we will continue attempting to market time commodity exposures).
China-centric stocks have benefited from the mix of reopening, and generally supportive “business friendly” rhetoric from leadership, suggesting that intervention is done for now (at least until the economy is on much firmer footing).
The Nasdaq has enjoyed a strong month, as the market prices a pause in the Fed (more than that really, pricing 150bps worth of cuts over the next couple years). The mega cap tech stocks have been in downgrade mode, and now, having repriced are a) cheaper and b) cutting stuff, meaning potentially “right-sized” for conditions (e.g. no more expensive but unprofitable “blue sky” projects) and a) + b) is attractive to the marginal investor.
The strong month for the metals and mining indices is a continuation of the COVID recovery, and also driven by undersupply issues due to a lack of investment, both pre and post pandemic.
Within the local market, specifically by sector, Materials outperformed, but the entire market rose, driving all sectors.
By stock, the best performers were Materials, followed by a smattering of consumer discretionary names. Generally, you can tell when your direct equities portfolio is going to lag the benchmark, just by eyeballing the winners, and noting you don’t own of them.
Yesterday’s retail sales print makes us very sceptical of the discretionary names ex-ante returns…
The laggards, somewhat unsurprisingly, were the defensive winners of the prior month, December, when markets fell. Spark, Amcor (which we own) alongside Tabcorp, APA, amongst the notables.
Reporting season locally is about to begin.
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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.
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