ASX less shit on crap GDP

AUD is down following GDP:

XJO is less shit for the same reason, loving poor growth and bid bonds:

However, Dalian is off:

And Big Iron is hit hard with RIO below $70 again:

Killing pensioners has gone out of fashion on a raft of broker downgrades:

Big Gold may headed into the correction I’ve expected for months:

Big Sleazy is up as yields fall:

Big Dung is mixed:

ASX less shit on crap GDP! Citi is hopeful:

Resources stocks are still likely to boost Australia’s S&P/ASX 200 share index to 6400 points next year according to Citi.

That implies a potential 8 per cent rise from the current level of 5948.8 points for the benchmark index.

“Even after earlier upgrades, we continue to estimate that spot commodity prices, if they persist, could lift FY18 market earnings forecasts another 5 per cent,” equity strategist Paul Brennan says.

“If the market moves up to our forecast of 6400 by end next year, we see performance concentrated in the resource sector still. Other cyclical sectors, majority household facing, seem to offer less now, including banks, but the added areas we see opportunities in remain some of the other oligopolies, supermarkets and insurers, though not yet telecoms.”

He notes that consensus FY18 market earnings growth ex-resources has been pared by as much as 1.5pc since August reporting season, but market growth has been raised 2pc overall due to resource earnings. Overall he says operating environment for Australian companies seems to be getting better, despite varying across sectors.

The market has so far looked straight through the bulks bounce without blinking. Big call to reach 6400 on miners. It might have been banks but the RC has killed that.

I see more of the same disappointment next year for XJO.

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David Llewellyn-Smith is chief strategist at the MB Fund which is currently long local bonds and international equities that offer superior growth and benefit from a falling AUD so he is definitely talking his book. 

Here’s the recent fund performance:


Source: Linear, Factset

The returns above include fees and trading costs on a $500,000 portfolio. Note that individual client performance will vary based on the amount invested, ethical overlays and the date of purchase. The benchmark returns do not include fees. October monthly returns are currently at 4.9% for international and 4.2% for local shares. 

If the themes in this post and the fund interest you then register below and we’ll be in touch:

The information on this blog contains general information and does not take into account your personal objectives, financial situation or needs. Past performance is not an indication of future performance. The MB Fund is a partnership with Nucleus Wealth Management, a Corporate Authorised Representative of Integrity Private Wealth Pty Ltd, AFSL 436298.

Comments

  1. RIO: classic “pause-to-catch-it’s-breath” in continuing 2 year uptrend – don’t therefore use weakness to short.
    Exactly the same for BHP and Chinese share markets.

    That the base-metal, IO and coal markets are holding up so very well while the USD explodes up, supports continuation of the the 2 year trend.

      • How low will the ASX go then? – It does not matter, at all – it’s going much higher first. Then, after, I’ll tell you … you have a year on your side, at least, on the up.

      • “it’s going much higher first. Then, after, I’ll tell you … you have a year on your side, at least, on the up.”

        Based on what? Short rates are rising, the yield curve is flattening. the FAANG market darlings have blow off tops, and everything is horrendously expensive. Suspect your bonus “momentum” year may be already up.

      • Even StevenMEMBER

        @ nyleta

        Hard to see how an ASX bloodbath can emerge. Valuations are not stretched and are anchored by profits / dividends.

        Unless you are suggesting div yields will rise to e.g. 7 or 8%. Or that company profits will plummet, in which case employment and property prices will become interesting.

      • @ each way bet……..most of the defences we had during the last global shock are gone…used up to maintain current consumption. Sure we will still get dollar swaps from the Fed but the punters are tapped out and the gov. debt is now over 50% of revenues…always was the benchmark to pull your head in.

        We are much more exposed to China now than in the last shock…looking too hard to the US is like worrying about Great Britain during the Great Depression…..the industrial behemoth is where the real danger is. We are just a pimple on the elephants behind, there is no real depth to our economy and we will soon get swept up in any dramas. Also in a thoroughly financialised economy a drop in the markets can cause a recession all on its own… no industrial concerns needed.

        That is without geo-political worries…. the sky is dark with returning chickens

      • @Even Steven
        ASX earnings are largely correlated to commodity prices and – a bit less directly, but more importantly -house prices. Pay close attention to house prices, especially Sydney. There’s been a lot of pro-cyclical forces amplifying the current boom which could unwind rapidly.

      • HAHAHA yes they do love round numbers and multiples of 5 also. In my experience, iIf you ever see a price or effect size that is a multiple of 5% it is highly likely there is little or no maths backing that figure/calculation. Classic stuff

      • Yes, IO higher from here = performing very well, especially given the bearish short-term background + higher USD.

        Short-rates are not rising anywhere, except in America – get it right matey – you don’t know what you writing about. Inverted yield curve does not signify impending recession, this time round as macro-economic management has more arrows in it’s bow. FAANG changes just because tax cuts/etc in USA will NOW [ but had previously been anticipated ] not mean that they repatriate funds The small penetration of neckline on HSCEI is so insignificant as to be correctly ignored by everyone except amateurs. Long rate increases now in USA probably at medium-term peak

      • Pretty sure that was directed at me.

        @Rise wow HSCEI touched 11150, you were there buying that one I’m guessing? And what’s with Nikkei? Looks like the amateurs have control of that market too. I mean seriously matey I don’t mind listening to a different opinion but you’re just bluster and baloney. People like you get skewered by markets sooner or later.

  2. False break up in ASX big double top. Everyone is long risk with debt. VIX has been elevated for a while, throw in a couple of % drop and it will get ugly. US interest rates are going up 20% next week(1.25 to 1.5) and they are the rates most of the world pays. Do not understand why iron ore isn’t half but Baltic Dry indicated the move down was a false one. It makes zero sense though.

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