Damien Klassen at Wilson HTM gets another gold star from me today with a pet argument of mine elegantly expressed as usual:
There’s a lot of market debate about banks vs resources, which is a curiously Australian problem due to the sheer size of those sectors in our stock market. Most international investors make a growth vs defensive call and then decide how to implement, the banks vs resources argument is a bit of an apples vs oranges discussion to them.
The argument that irks me though in the recent debtate is the one that says buy resources because they have underperformed banks over the last few years – as the charts below show, it all depends on your frame of reference.
Banks vs Resources – Common Base
Additional Thoughts: In my view the longer term banks vs resources boils down to your take on China growth:
Growth increasing = buy resources, sell banks
Growth slowing = buy banks, sell resources
Growth tanking = sell both
I think the second category to be much more likely than the first and and am wary of sliding into the third category.
Having said that, markets don’t move in straight lines – see our portfolios / asset allocation for how we are playing this at the moment with regards to stocks and sectors.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
