THINKING OUT LOUD

Current Market Views – March 23, 2018

by Rob Zdravevski

Overnight stockmarkets reacted to U.S. trade tariff news, as if it’s the first time they had heard about it. Thank goodness for irrational behaviour, for if everyone was sensible we’d seldom see attractive investment opportunities.

It forever interests me how some people when talking about political and financial news events morph into being a full-blown global macro economist.

Unless your daily investing involves trading the “macro” then I wouldn’t waste too much time analysing whether a Chinese/U.S. tariff dispute will affect the price of your shares in an Australian health care business.

What I am currently seeing and expecting is;

Global equity indices still heading lower. DAX, CAC, SPX, ASX 200, NKY – all heading lower;

Watch U.S. KBW as its leading the SPX lately. It’s in a short term downtrend with the Longer Term yet to confirm a greater move, but non-confirmation from U.S. Transports Index and couple others means….the stance is to buy on this second retrace / retest of the January 2018 mean reversion.

FTSE 100 & Spain’s IBEX may trough first, I’m finding cheap stocks in UK

Oil prices still heading higher as is the CRB (commodities) Index. Did you know that over the past 9 months, Oil has risen from $43 to $65? Not much fanfare at all about that move in the media.

Thus getting ready for a further advance in broader commodity prices and related stocks. Will watch BHP and it hods $28, I’m a buyer.

I feel the AUD/USD can hold 0.7640 – 0.7690 level and move to 0.82, 9 months hence.

U.S. 10 year Treasuries have had a major reversal week = big Buy signal. This means bond prices are going higher = Yields go back lower, to retrace part of the recent 6 month advance. Looking for yields to fall from current 2.80% to the 2.55% – 2.62% range.

For the money flow, rotational crowd, in the immediate timeframe, money rotates out of stocks (share prices fall) and into bonds to a point where bonds yields are not attractive again – And then, Hey Presto! – stocks will look like an interesting option.

Interestingly, Tariff Talk has not resulted in strength in the U.S. Dollar…………And more so, the Shanghai Composite index is looking starting a new, notable leg lower in prices. More on this later.

Our negative view on Aussie Banks still stands. They are heading lower. And we are pleased our clients aren’t holding Aussie bank and ASX 200 Index exposure, due to the high bank weighting, of course.

As always, feel free to call to discuss any part of my musings and check my disclaimer, in case you act on anything I have written.

Until next time,

Yours sincerely,

Rob