Wall Street remains largely positive for the week, with the S&P 500 up close to 1%. On Friday, however, the upcoming French election (on Sunday) did knock confidence around. The consensus points to a win for the centrist Emmanuel Macron and an email late this week from Master Feng revealed that he has the Emperor’s colour of purple hovering over him! (Feng is a feng shui master with a hot record of getting election calls right!)
For those looking for good news, US earnings season has started. As Friday kicked off, 77% of the 95 companies in the S&P500 beat EPS expectations and 67% revealed revenue figures better than tipped by experts.
The issue to watch for next week is the fact that the major indexes are down for April and the S&P and Dow Jones index slipped below their 50-day moving averages.
“The 50-day moving average is the line of demarcation for this bifurcated market,” said Adam Sarhan, CEO of 50 Park Investments. “The longer the indexes stay below the 50-day moving average, the more negative the outlook gets.” (CNBC)
At home, once again our seriously weak sell-off trend has reappeared for the S&P/ASX 200 index, with Friday’s 0.6% gain leaving us with a 0.6% loss for the week. Not bad considering some of the negative hype around from hysterical housing headlines to Armageddon Amazon media commentary and worries about iron ore, as well as oil prices.
Potential housing weakness ahead (because of banks and APRA ganging up on property investors) is supposed to hurt banks. Iron ore in a bear market after a 20% plus fall is supposed to spook us and wound the likes of BHP, despite a near 100% rise in prices from early 2016.
Ironically, after a week of stressing over rising rates and falling commodity prices, the banks and the miners led the stock market higher on Friday.
So what helped? I’d love to say the International Monetary Fund’s bullish call on world and Aussie economic growth but, as I’ve consistently bagged this ordinary forecasting body, I can’t jump on the bandwagon. All I can say is I’m glad they see it my way.
And anyone doubting the role of Donald Trump to what we see with stocks must be alerted to a very important guy, who’s little known right now, called Steve Mnuchin. His name looks like Munich misspelt but he got it right when, under Presidential pressure, he tipped tax cuts weren’t as far off as the market had assumed.
I like the way Donnie doesn’t ignore market demands but I hope he can deliver ASAP. “Sell in May and go away” believers thought they were in with a chance this year, when you add Syria to North Korea to the French election on Sunday to the failed US health reform to the expected delayed tax cuts. And all this on top of what many argue are stretched stock prices or valuations.
Apart from good Chinese economic data (with growth coming in at 6.9%) is the takeover and merger activity, which tells you that big operators see value in the market. Clearly, Cheung Kong Infrastructure Holdings from Hong Kong sees something in DUET.
An interesting story was the ATO winning a transfer pricing case against Chevron, which could have ramifications for the $400 billion in loans that multinationals use to finance their activities in Australia. This ruling could cost Chevron around $340 million in taxes, penalties and interest on a 2003 loan for its North-West Shelf gas project. (SMH)
What I liked
- This from our Report on February 17 on Duet Group: “DUET Group (DUE) Upgraded to Buy from Neutral by Citi B/H/S: 1/5/0 Target is $3.”After a 9.8% surge, the stock finished at $3.01!
- Commonwealth Bank Business Sales Indicator (BSI) – a measure of economy-wide spending – rose by 0.6% in trend terms in March – the strongest growth in 15 months. Growth had averaged just 0.2% over the prior five months.
- The Bureau of Statistics (ABS) reported that new vehicle sales rose by 1.9% in March – the third rise in four months. Annual sales of SUVs were at record highs.
- Existing home sales in the US rose to levels not seen since 2007.
- The leading indicators index in the US rose by 0.4% in March, after a 0.5% lift in February.
- Industrial production in the US rose by 0.5% in March, in line with forecasts.
What I didn’t like
- A profit warning at Coca-Cola Amatil sent its shares tumbling 10.5%. This is at odds with what the MD, Alison Watkins, was expecting only in February! It says something about her company’s grasp on the market or something about the economy! As a non-shareholder, I hope it’s the former. With sugar on the nose, it could be a case of ‘how sweet it isn’t!’
- The Philadelphia Fed Reserve index eased from 32.8 to 22 in April.
- The National Association of Home Builders in the US index eased from +71 to +68 in April (forecast +70).
- The New York Federal Reserve manufacturing index eased from +16.4 to +5.2 in April (forecast +15).
For the week, let’s hope we can say “au revoir” to French election jitters. The same goes for the hype around Amazon and its potential damage that it supposedly will inflict on retailers.
The week in review
- How can you prosper in volatile times? Tony Featherstone [1] revealed four ‘risk off’ ETF strategies to counter a market pullback or maintain portfolio returns.
- George Boubouras [2] explained how Australian and international equities provide investors with different – but complementary – outcomes.
- Catapult was this week’s Professional’s Pick from Manny Pohl. Find out why [3].
- This week [4], the brokers upgraded Telstra and TPG but CSR was downgraded.
- And Paul Rickard [5] answered reader queries about Telstra, JB Hi-Fi and what differentiates the big four banks.
Top stocks – how they fared
What moved the market?
- Geopolitical concerns around Syria and North Korea
- Commodity prices pulling back
- The upcoming elections in Europe
- US reporting season
Calls of the week
- British Prime Minister Theresa May called a snap election for June.
- Amazon confirmed it will roll out its full suite of retail services into the Aussie market.
- Paul Rickard and George Boubouras said Telstra is moving into the buy zone. George reckons it’s a buy under 4 bucks.
- And famous US television host – Bill O’Reilly – was sacked by Fox News after facing allegations of sexual harassment.
The week ahead
Australia
- Monday April 24 – State of the States
- Wednesday April 26 – Consumer Price Index (March Qtr.)
- Wednesday April 26 – Weekly consumer confidence
- Thursday April 27 – Export & import prices (March Qtr.)
- Thursday April 27 – Residential land report (Dec Qtr.)
- Thursday April 27 – Speech by Reserve Bank official
- Friday April 28 – Producer prices (March Qtr.)
- Friday April 28 – Private sector credit (March)
Overseas
- Sunday April 23 – French Presidential election
- Tuesday April 25 – US Case Shiller home prices (February)
- Tuesday April 25 – US Consumer confidence (April)
- Tuesday April 25 – US New homes sales (March)
- Tuesday April 25 – US Richmond Fed survey (April)
- Thursday April 27 – US Durable goods orders (March)
- Thursday April 27 – US Pending home sales (March)
- Friday April 28 – US Economic growth (March quarter)
- Friday April 28 – US Employment costs (March quarter)
Food for thought
“If you do what you’ve always done, you’ll get what you’ve always gotten”
– Tony Robbins
Last week’s TV roundup
- Charlie Aitken [6] explains why he’s bullish on China and shares his tips for investing (Switzer Investor Strategy Day – 4 April, 2017).
- Contango Asset Management’s George Boubouras joins the show [7] to share his views on the stock market, Telstra and the companies he’s watching right now.
- Tom Elliott from Beulah Capital joins Super TV [8] to discuss the latest takeover targets, as well as companies looking at demergers like Fairfax and BHP.
- And there’s plenty out there worrying the market right now, so what should we make of it all? Marcel von Pfyffer from Arminius Capital shares his views on Super TV [9].
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 the biggest mover was Seek Limited, with a 3.06 percentage point increase in the amount of its shares sold short to 9.12%. Syrah Resources went the other way, with its short position moving from 16.04% to 14.79%.
Source: ASIC
Chart of the week
According to CommSec, in the past, a slowdown in luxury vehicle sales also marked a slowdown in upper-end property prices and sales – which tends to flow into the broader property market. And with the sales of luxury passenger cars and SUVs down from a record high in December 2016, the relationship between vehicles and property could be one to watch.
Top five most clicked stories
- Tony Featherstone: Four ETF strategies [1]
- Staff Reporter: Buy, Sell, Hold – Telstra and TPG upgraded [4]
- Questions of the Week: Telstra, JB Hi-Fi and the banks [5]
- Charlie Aitken: Wall Street correction warning [10]
- George Boubouras: Horses for courses – local equities for income and global equities for growth [2]
Recent Switzer Super Reports
- Thursday April 20: Local and global [11]
- Thursday April 13: Buying opportunities ahead? [12]
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.