Who would have expected such a good week for stocks…

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Who would have expected such a good week for stocks? I’d like to say me but, in all truth, while I hoped for it, I wasn’t sure it would happen.

It wasn’t a bad effort, considering it’s a month for stock sell offs.

For the record, it was the best week for stocks in two months and didn’t I write last week that we have to “stay bullish?” Yes, I did, but I wasn’t expecting such a quick result!

It was a pretty good effort considering material stocks didn’t help. And as I alluded to the above, in June, a lot of investors and fund managers sell off their disappointing companies to pick up a capital loss to offset some capital gains.

What did well? Healthcare stocks, as usual, property stocks and consumer discretionary as well.

In case you missed it, we were up 1.7% for the week on the S&P/ASX 200 Index to finish at 5774 but I would’ve liked a close above 5800 for psychological reasons.

Imagine if oil and iron prices hadn’t given into gravity over the week, with BHP down 2.3% over the four days trading.

The banks helped as well, with the CBA up 3.4% over the week. The others had nice rises but nothing like the country’s biggest bank. I’ve always been interested about why a move on banks or say, telcos, in the US leads to similar moves here, but it worked out this week, with tech stocks out while financials were in on Wall Street and we played follow the leader.

Individual companies and sectors aside, I liked this observation from a market expert, which mirrors my view on what’s going on with stocks right now. “The bargain hunters have stepped into the banks this week, bringing them back from oversold levels,” said Romano Sala Tenna, portfolio manager at Katana Asset Management.

“And while there was a sell off in oil, key oil stocks in Australia held up quite well. People are looking through the dip and think there’s a better price ahead.”

There’s no real appetite to buy hard because we lack the catalyst to go for it, such as Donald Trump getting a tax win in Congress, but on the other hand our view on economies and earnings means we don’t want to dump stocks.

I also think we might be downplaying the positives of low wages with the employment data this week, showing that employers are in the market for workers and obviously the slow pay rises do make future employees more attractive.

On Wall Street overnight, the economic data remained mixed and you’d have to be an optimist worse than me to see something good in the news that Q1 GDP was 1.2% following a Q4 2016 reading of 2.1%.

Other news was not positivity engendering but the Dow was in green territory for most of the trading session on Friday and the Nasdaq was only just negative.

Like here in Australia, stocks are being given the benefit of the doubt but I’d love to see something big, beautiful and bullish coming along to get stock-buying happening.

It might have to wait until earnings season.

What I liked

• As a doubter on how big and bad Amazon will be here, it was good to see Super Retail Group have a 12.6% rise this week. Its CEO, Peter Birtles, gave a leg up for the stock a few weeks ago on my TV show, so I’m glad to see it has won the market over. The 66% jump in profits in February was a nice help for the stock.
• Unemployment at a four-year low of 5.5% and employment up, with 155,000 jobs created this year.
• The NAB business conditions index eased from +12.7 points to +12.0 points in May. The business confidence index eased from a 7-year high of +13.2 points to +7.1 points. Capacity use rose to a 9-year high of 82.4%.
• “The price of gold dropped lower after the US Federal Reserve raised interest rates this week, a nod to the recovery in the US economy.” (Fairfax)
• The Fed lifted rates as expected by a quarter of a percent, with the federal funds target now between 1.00-1.25%. It noted that the: “labor market has continued to strengthen and that economic activity has been rising moderately so far this year.”
• The Chinese economic data coming in better than expected, which helped slow down the fall in iron prices this week.
• The Bank of Japan upgraded its assessment of private consumption and overseas growth, which suggests the central bank thinks the export-driven economic recovery was looking like the real McCoy!
• The New York Federal Reserve manufacturing index rose from minus 1 to +19.8 in June (forecast +4).

What I didn’t like

• The UK election result and news that the Bank of England’s voting members went close to supporting an interest rate rise! That’s crazy stuff right now.
• Iron ore and oil prices falling.
• The tech turn-off in the USA, with brokers giving the thumbs down to the likes of Apple and Alphabet (Google). This could be a psychological negative for the broader market, despite the fact they did look overpriced.
• This chart showing where we think is the wisest place for our savings. While I think paying off debt is a smart idea, I think super is not seen as important as it should be. Sure, the Government has lowered the popularity of super, and I don’t like that, but super is still a great investment option for savings.

• The Philadelphia Federal Reserve business index fell from +38.8 to +27.6 in June (forecast +24).

On ‘Amazonophobia’

The big news on Friday was Amazon’s decision to pay $13.7 billion in cash for Whole Foods, valuing it at $US42 a share. As an initial reaction, Wal-Mart was down 4%, while Target lost 6%. This intriguing play does show what could happen here with Amazon.

Some businesses could get bought and others might suffer and it’s really the uncertainty of what this disruptive Goliath of retail might mean for our retail sector that has been hurting retail share prices – not any reality. There obviously is a threat but there’s also an opportunity and I’ll be trying to work that out in coming weeks.

The week in review:

• This week, Tony Featherstone ^[1] revealed three stocks to think about selling before the end of financial year.
• Charlie Aitken ^[2] discussed what a “passive investing bubble” means for a large tech company like Apple.
• James Dunn ^[3] explained how margin lending works.
• The super changes set to take effect from July 1 may affect how and when you apply for an actuarial certificate. Melanie Dunn ^[4] outlined exactly what you need to know.
• BHP Billiton and CSL ^[5] were in the good books this week, while Macquarie Atlas Roads Group was downgraded.
• In our second broker report ^[6], Ansell was in the good books but Medibank Private was out of favour.
• And in Questions of the Week, Graeme Colley answered reader queries about segregated and unsegregated funds ^[7].

Top stocks – how they fared

What moved the market?

• A rate hike by the US Fed. The Central Bank raised interest rates by 0.25% – the third rate hike in six months.
• Better-than-expected jobs data. 42,000 jobs were created in May and the unemployment rate fell to a four-year low of 5.5%.
• A steep fall in global oil prices. Data showed an unexpected lift in US gasoline inventories and the International Energy Agency forecast a rise in oil output from non-OPEC players.
• A sell-off in technology stocks and rotation into financial stocks in the USA spread to Australia. This led to some bargain hunting in our major banks and propelled the market up by 160 points over Tuesday and Wednesday.

Calls of the week

• Fed boss Janet Yellen pulled the trigger on an interest rate hike, forecast one more rate hike this year, and revealed plans to gradually trim bond holdings.
• Bruce Gordon and Lachlan Murdoch refused to guarantee a new refinancing package for Network Ten, forcing the television broadcaster into voluntary administration. Murdoch and Gordon joined their holdings to facilitate a restructure.
• Telco Vocus Group reaffirmed its underlying full-year profit guidance of between $160 and $165 million.
• Downer EDI increased its interest in takeover target Spotless to almost 30%, but Spotless is telling shareholders to bin the offer!
• And PM Malcolm Turnbull tried his hand at stand-up comedy at Parliament’s annual Mid-Winter Ball. Check out this audio ^[8] of Turnbull impersonating The Donald.

The week ahead

Australia

• Monday June 19 – New vehicle sales (May)
• Monday June 19 – Speech by Reserve Bank Governor
• Tuesday June 20 – CommBank Business sales (May)
• Tuesday June 20 – Weekly consumer confidence
• Tuesday June 20 – Reserve Bank Board minutes
• Tuesday June 20 – Residential property prices (March)
• Thursday June 22 – Detailed job data (May)

Overseas

• Monday June 19 – China House prices (May)
• Tuesday June 20 – US Current account (March quarter)
• Wednesday June 21 – US Existing home sales (May)
• Thursday June 22 – US FHFA home prices (April)
• Thursday June 22 – US Leading index (May)
• Friday June 23 – Flash purchasing managers indexes
• Friday June 23 – US New home sales (May)

Food for thought

“Successful people do what unsuccessful people are not willing to do. Don’t wish it were easier; wish you were better.” Jim Rohn

Last week’s TV roundup

• To discuss Network Ten’s future and share his views on the economy, interest rates and more, News Ltd’s Terry McCrann ^[9] joins Super TV.
• Jason Huljich ^[10], CEO of listed property group Centuria, joins the show to discuss the commercial property sector and his views on the economy.
• Where is the Aussie market headed? Is there value in the major banks? To share his insights, George Boubouras ^[11] from Contango Asset Management joins Super TV.
• The local market has been challenged in recent times, but global equities have held firm. To discuss how he’s investing, James Soutter ^[12] from K2 Asset Management joins Super TV.
• And Rudi Filapek-Vandyck from FNArena shares his views on the local and US share markets, companies he’s watching, the retailers and more ^[13].

Stocks shorted

ASIC releases data daily on the major short positions in the market. These are the stocks with the highest proportion of their ordinary shares that have been sold short, which could suggest investors are expecting the price to come down. The table shows how this has changed compared to the week before.

This week, one of the biggest movers was Metcash with its short position increasing by 1.37 percentage points to 12.29%. Vocus Group went the other way, with its short position decreasing from 15.33% to 11.72%.

Source: ASIC

Chart of the week

Jobless rate falls to 4-year low!

Aussie jobs jumped by 42,000 in May – the third month of strong jobs growth. Full-time jobs rose by 52,000 and part-time jobs fell by 10,100. As the chart above shows, the jobless rate fell from 5.7% to 5.5% – a four-year low!

Top five most clicked stories

• Tony Featherstone: 3 stocks to sell before EOFY ^[1]
• Charlie Aitken: Apple…has it peaked? ^[2]
• Staff Reporter: Buy, Sell, Hold – what the brokers say ^[6]
• Charlie Aitken: “Sell everything” is “fake news”… APN Outdoor is good value ^[14]
• Tony Featherstone: 3 niche A-REITs still offering value ^[15]

Recent Switzer Super Reports

• Thursday 15 June 2017: Has Apple peaked? ^[16]
• Thursday 8 June 2017: Fake news ^[17]

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.