The market has remained resilient ignoring the weak start in the Futures market yesterday morning to continue the current medium-term uptrend. We managed to get through May without any great volatility, June is generally a light news month with many investors waiting for the next reporting seasons in July for the US and August locally. At this stage we expect the current medium term uptrend to continue as we all look forward to further easing of restrictions.
In the background the focus point will still be Recession VS Stimulus. We have the US FED on a QE infinity path, The RBA has rates at all time lows whilst the Morrison Government are hinting more fiscal policies to come.
Markets are seeing the light at the end of the tunnel and are being held up by;
- Economies reopening
- Hopes of a vaccine
- Low interest rates with the view they are going lower
- Bond buying, to keep the Credit markets ticking along
- Increased unemployment benefits and programs to help keep staff employed that would have lost their jobs otherwise
- Hints of further stimulus on the way.
Earnings sentiment is still exceptionally low, with many analysts downgrading expectations. If sentiment continues to increase around lockdown relief, we could see a shift here later in the year. But for now, things are expected to be negative through the July – August reporting seasons. Future prediction on growth at this stage seems to be weak through the rest of this year and most of next, where it is expected to jump strongly.
With U.S markets up again our market has a soft lead for the open. However, their futures are sitting slightly in the red this morning, and if they come off further expect our soft push higher to be reversed during our session today. In fact, it looks like we might even open flat.
Markets are looking a bit toppy in the short term, and it would make sense for a pull back soon. Right now, it seems we are just having a breather as the market weighs up the rising civil tensions in the U.S. So far nothing has been enough to tumble markets against the Fed spending and stimulus and until we see differently, we shouldn’t expect anything to. Continue to trade with the uptrend in the medium term, just be aware that the market is a bit uncertain in the short term.
US stocks pushed higher overnight, defying worries around the US-China relationship and continuing protests and riots in many US cities. The gains were fairly muted compared to some of the recent moves however. US stocks were supported by a manufacturing measure which came in better than expected with the best result in four months. There were also reports that Chinese officials had told farmers not to go ahead with purchases of US products as agree to in last year’s trade deal, although the market was happy to shake this off for now. Oil and Gas and Financial stocks were the strongest performers overnight, with Healthcare and Telecom stocks the weakest performers.