The high growth space that held strong through Covid sold off strongly overnight following Janet Yellen’s comments on Interest rates and a global minimum tax. The Nasdaq closed 1.88% lower around 5% from recent highs. The SP500 closed only .67% lower.
We have been saying this for a while, Value should outperform growth this year. Many of the high growth stocks of recent years are likely to struggle to find the growth of last year’s strong results as economies reopen. Many people are now shifting towards spending money on Holidays and Restaurants rather than home entertainment.
As we move more and more into May, we will continue to ask the big question on if we will see some form of correction. It seems we could be starting to see that selling come into the Nasdaq space already. More times than not, May is a weak month. What that means to me this year is that another move higher is likely and then for the market to give that backup and some. I will be leaning on technical signals to provide proof that this is playing out before placing any trades. In saying that I will also be a little more cautious over the next few months and close trades quickly if the markets look likely to pull back.
The RBA didn’t really tell us anything new but reconfirmed that rates will likely stay low until 2024. Keep an eye on the 2021-22 Federal Budget at approximately 7.30 pm (AEST) on Tuesday 11 May 2021. Our market will not like it if the government takes a strong stance on balancing the budget whilst most of the world is in a stimulatory phase.
The XJO is expected to fall on open this morning, following a volatile night of trading in the U.S. Meek falls have typically reacted to the key level at 7000, so unless U.S futures move hard into the red, our market has a good chance of being buoyed.
With the U.S reversing much of its losses by close, our market should interpret that well; strength remains, and any kneejerk will be bought straight back up.
Once again, we are tracking sideward and consolidating. How long this will last is hard to know, but the range between 7000 and 7100 is particularly tight, so we wouldn’t expect it to last much longer. The trend remains bullish so we would typically expect the consolidation to lead to further bullish movement in the medium term – though this remains uncertain as commentators are remarking about how stretched things look.
US shares closed lower overnight with technology stocks leading the selling. The tech-heavy NASDAQ index bared the brunt of the selling, falling close to two percent; the other major indices were relatively flat in comparison. Stocks faced volatility as Treasury Secretary Janet Yellen in an interview with The Atlantic stated that the large spending under the Biden Administration may eventually lead to a lift in interest rates to avoid an overheating economy.
She went on to state that ‘It could cause some very modest increases in interest rates to get that reallocation, but these are investments our economy needs to be competitive and to be productive.’ Prices were down strongly half-way through the overnight session, but rallied by the close to pair losses. In economic data, the US trade deficit increased to its highest ever level in March, with a big jump in imports from China. Tech stocks fared the worst overnight, while consumer discretionary and communications stocks also fell. Materials, Financials, and Energy stocks closed higher on average.