Podcast Archive

The US market takes another solid step overnight.  It seems every man and his rat has a vaccine now. Reminds me of the Lithium boom. Suddenly everyone's involved in a vaccine. Not complaining.  Not sure there is much to add this morning, the market is doing exactly what we are positioned for. The light in my office has gone from Red to Green and there is a chance that today we will break up and out of the sideways trading range. There is one strategy change today. We have decided to progressively use the capital tied up in the banks to fund more geared recovery plays if the market continues to rally. They are high street banks not investment banks which is why their US counterparts (JP Morgan, Citibank, Goldman Sachs) are enjoying the bounce whilst they are out in the cold. 

The Vaccine rally took a shot in the nose overnight as the Moderna data is questioned. But our market seems unphased today and we are rallying off the lows with recovery stocks still favoured. Big boring quality, healthcare and Banks lag. We summarise the strategy stance today, still fully invested, biased to recovery stocks and happy to be testing the top of the trading range rather than the bottom. 

A very interesting night in the US - a rally based on hopes for a vaccine and an abrupt end to the virus. Whether it is correct or not is not the point, the more interesting thing is to dissect the stock and sector performances overnight which make it very very clear what your game plan needs to be come a recovery rally. In the newsletter today we name all the sectors and stocks that will and won't perform in a virus free rally. Whether to play the rally or not, is a choice. We are. We're fully invested, with weightings to the recovery stocks and sectors and we will adjust that position on a daily basis depending on how this develops. There are times in the stock market where you have to think less, act fast and re-assess as it develops. This might be one of those moments. 

Markets behaving themselves again. Resources in the lead. With not much going on this week we have gone through all the charts on our Watchlists and made comments on most sectors on both a technical and trend basis. We have also broken up all stocks into stocks that are trending up, trending down, bottoming out and topping out. We are still in this sideways trend in Australia waiting to see which way the virus news develops as we enter the "Relapse Zone" - the period after lockdown restrictions come off, particularly in the US and UK. All good so far but it'll take a couple of weeks on the London Underground and the New York Subway before cases pick up again if they are going to. 

This week in ‘On the Couch’, Henry is chatting to Alex Pollak the CIO and founder of a global technology fund, Loftus Peak. Alex has over 25-years experience in investing in disruptive business models and was instrumental in bringing both SEK and CAR to the market. He joins Henry On the Couch to talk disruptive technology and where he sees the opportunities and why his fund has returned around 15% per annum since its inception 7 years ago.

We were getting that precipitous feeling about the markets as Wall St fell 2% on Tuesday and Wednesday and another 2% to the low last night (Dow down 458 at worst) only to find the Dow had rallied 800 points by the close. A reprieve. Markets sliding silently into the weekend. Today we talk about the risk of a relapse and how it may not be that bad. About the US markets peaking short term. About there being a bubble in some sectors not all. How not every market top is the pre-cursor to a crash. How volatility is picking up. How we hope the trade war is a small issue for the market. How we're losing patience with banks and are looking to overweight iron ore. 

Two nights of the US market going down 2% is not a good sign. Getting more cautious. Still in the sideways trading range, no break down yet and no need to change strategy yet. We have sold a few stocks this week and cash is back to 10-15% but its not a strategy call it was just selling a few peaking stocks. New risks now compound the virus relapse risk. We talk about those risk in the Strategy piece today - they include the risk of a L not V shaped recovery, Powell's comments about the risk of deep economic damage without fiscal support, the risk that the US markets are back into a bubble and the risk of an emerging market crisis. Would prefer to sell than buy at the moment but not doing anything unless this two day downtrend develops.

A couple of bad days do not make a downtrend but we are slightly more alert to the risks of a relapse this morning after warnings from the US medical experts about the damage coming out of lock-downs too early could cause. The market is still in a sideways pattern despite the falls, waiting for the break one way or the other. We have a quick look at the stocks that have done well and badly over the last couple of days as a template of what would happen is the market did fall again. Boring quality outperforms and high PE sentiment driven stocks sell off as do sector specifically in the line of fire from the virus. A useful insight of what to do if things turn down. We do happen to have taken a few profits today but not on a strategy decision, on an individual stock assessment. 

We assess the risk of a relapse in coronavirus cases - there is one - some country curves going up again. Boris Johnson is right, we are at a "Perilous Moment" as countries come out of lock-downs. If one of the big stock market countries relapses everything changes. We're assuming for the moment that won't happen but continue to watch the herd to see if it turns its attention to the theme. Meanwhile we look at a host of sector charts today and identify the sectors that are going to perform well and badly if the market next breaks up or down. We're still fully invested waiting for a break higher. If it the recovery theme cracks we'll obviously have to re-assess. 

The market is behaving itself again this morning with recovery stocks in the lead and a solid performance from one of our big overweight positions in Macquarie. I've done a series of one line bullet points on strategy this morning and summarised the major themes from last week. For now the low looks to be in and until proven otherwise we're going to assume the market is in recovery phase. We are moving from the 'market' issue to identify more subtle sector themes and within that will be classifying stocks as likely to see V, U or L shaped recoveries to help us decide which stocks to play in the next phase of the market recovery. It is still too early to buy that predictable boring long term quality stock portfolio, there's too much recovery potential in other stocks to be had.