
03 Jul Capital 19 Catch-Up
Weekly Index Movement
S&P500 | +2.3% |
Nasdaq | +1.9% |
Aussie All Ords | +1.3% |
Global share markets (with the exception of China) rose last week on the back of positive economic growth and declining inflation.
Australia got all excited when it looked like inflation was beginning to fall. Headline CPI fell to 5.6% versus last month’s 6.8%. If you look at month-on-month changes the May was actually negative at -0.4%. Does that count as deflation?
But anyone who drives knows petrol is a lot cheaper than a year ago and is a big part of this drop in headline CPI.
There is no drop in services. In fact, eating out, insurance and rents are all still above 6%. Add in the coming 25% electricity hike and core inflation will be sticking above 6%.
As much as the market got excited about this month’s drop, it won’t sway the RBA, who looks at core inflation. They will increase by another 25bps this week and Aussie shares will not like it.
Add in our biggest trading partner, China, not delivering on their expected post-covid bounceback (manufacturing data showed a contraction for a third straight month) and it is hard to make a case for further share price expansion in Australia.
Quite the opposite story in the US where GDP got revised up from 1.4% to 2.0% for the first quarter and Personal Consumption was stronger than expected at 4.1% vs 3.8% expected. Another interesting fact is home sales are up 12% on last year. You would think in the face of all these interest rate rises, home sales would be slowing. But never doubt the ability of the US consumer to spend.
If anyone still thinks there is a recession coming I am going to have to restrict your social media access as it is doing you no favours.
Markets are now officially back to bull market status so I thought I would look at a whole bunch of factors and what has worked so far this year
Basically the worst of last year has been the best of this year. Had you bought the stocks that had the 10% worst performance in 2022 you would be up 34% this year. Stocks with no dividends, massive PE ratios, large market cap and high short interest have been pumping
Given momentum is the single most powerful factor affecting stock prices……you know exactly what you should be buying now.
And July actually isn’t a bad time to be buying.
Over the last 10 years, July has been positive 9 times out of 10 with an average gain of 3.27% (I’m talking US here, not Aus)
This is the typical way prices move during the month – a slow grind higher so the earlier you buy the better
There are still a lot of shorts out there hurting. There are also a lot of people who don’t believe this rally. Both of those will become buyers shortly and move prices even higher.
It’s times like these that remind me why I hold so much tech in my portfolio. Just look at these year-to-date gains for big tech stocks.
How many of them do you hold?
Warning
Stock values can go down as well as up. It is possible to lose 100% of your investment in a stock. Any advice given by Capital 19 is general advice only and does not take your personal circumstances into account and might not be suitable for you.