Wednesday's Weekly Wrap
Economy and Indices
15 weeks and counting, the AU market continues the sideways churn.
The chart above shows the sideways churn with the black parallel lines. On the far right we can see that for the last few weeks the market has been lurking near the bottom
At this stage – we lighten our exposure and wait for our time to strike.
Leading Sectors This Week
Metals and Mining +2.5%
Healthcare + 2%
Consumer Discretionary -0.8%
Segments this Week
The smallest have been the best:
Small caps +1.5%
Emerging companies (smaller than small caps) +1.4%
Surprisingly the Mid-caps have been the weakest -0.6%. This is in stark contract to their performance over the last nine months as market leaders.
Interestingly our studies show that nine months is, on average, how long the market leaders remain in pole position.
A reason for small and emerging companies performing so well is that after years of miners falling in price, these two groups are laden with miners – the top performers these last few weeks.
The best performing companies were mentioned in the most recent episode of Talking Stock.
While the majority of the market converges to mediocracy with the index there are two key features:
Miners are the leaders shown in the blue circle (the two lines in that circle both represent miners).
Telstra has lost its investment grade status shown in the red circle. For more insight on TLS, listen to my interviews with some of the industry’s best:
Rudi Filapeck-Vandyck from FN Arena – Is Telstra worth holding?
Hugh Dive from Atlas Funds Management – Will Telstra cut dividends even more?
Gary Glover of Novus Capital – Has Telstra stopped falling?
While there is little conviction in the current mining leaders beyond commodity prices, we’re keeping trading positions light and will wait for a more dramatic wash-out or market fall. After such events, we look for the new leaders to emerge because, statistically, that’s when our approach to markets generates the best returns.
For insights on how to use these trends and themes within a portfolio, watch The Portfolio Series here.