Global markets were generally higher overnight as the US market edged to a new record high as financial shares rallied. Apple shares fluctuated as the company held an event to unveil a line-up of new products including an improved iPhone which uses facial recognition to unlock it.
An interesting survey of fund managers published by Bank of America showed that at the start of this month the level of underweight positions (an underweight position means the fund is holding less shares than it would under normal circumstances) in US equities rose to a ten-year high.
While the US and NZ markets are clearly not cheap and the markets overall are at the upper side of valuations, we believe investors should focus on holding solid companies with strong investment tailwinds behind them. If there is concern around the overall level of the market and potential for a market correction, holding a cash allocation is ’s preferred method of protecting against downside moves.
Stock in Focus: Macquarie (MQG.AX)
As we touched on yesterday, shares in Macquarie have rallied after the investment banking giant released an updated profit outlook.
MQG said stronger performance fees in the first half of its current financial year are likely to flow through over the full year and push its financial results higher than last year (which is an upgrade to prior guidance where MQG stated they expected 2018 profit to be broadly in line with 2017’s record profit of $2.2bn).
MQG also said its first half will be broadly in-line with the second half of last year in which it generated a net profit result of $1.16 billion and declared a final dividend of $2.80 per share.
This was a pleasing update. However, as we have discussed previously, while we are positive on the MQG investment case and believe conditions could continue to swing in its favour, MQG shares are driven by volatile factors such as equity market conditions and exchange rate moves.
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Australia & New Zealand Market Movers
The Australian share market was higher on Tuesday (ASX 200 index +0.58%) for a second straight day as investors waded back into riskier assets and the Banks led the charge following gains for US financials the day prior. Banks and miners started the session on an upbeat note and moved higher through the trading day. In stock news, Insurance giant QBE was higher after it announced a top management reshuffle, with chief executive John Neal to be replaced by financial chief Pat Regan.
The New Zealand market was lower yesterday (NZX 50 index -0.14%) as CBL Corp extended its decline while retirement stocks Arvida Group and Metlifecare were sold on pre-election jitters. Most blue-chip NZ stocks were lower as uncertainty around the election result weighed on the market which failed to follow global moves higher. In stock news Arvida Group was lower as it said it plans to raise $77m in a discounted rights issue to help pay for three new retirement villages which it says will boost annual earnings.
3 Things Markets Will be Watching this Week
1. Important Australian employment data is set to be released on Thursday.
2. US inflation data is published at the end of the week.
3. US politics as investors are concerned around the Trump Administration’s ability to pursue its pro-growth agenda.
Have a Great Day,
Team