Overseas markets continue to fall, futures down 36 points
Published 07-SEP-2020 09:38 A.M.
4 minute read
Hey! Looks like you have stumbled on the section of our website where we have archived articles from our old business model.
In 2019 the original founding team returned to run Next Investors, we changed our business model to only write about stocks we carefully research and are invested in for the long term.
The below articles were written under our previous business model. We have kept these articles online here for your reference.
Our new mission is to build a high performing ASX micro cap investment portfolio and share our research, analysis and investment strategy with our readers.
Click Here to View Latest Articles
In what resembled the start of the ‘tech wreck’ after the dotcom bubble burst some 20 years ago, the NASDAQ crashed from more than 12,000 points on Wednesday to less than 11,000 points on Friday. After discussing for some weeks the seemingly unjustifiable extent of gains in the tech sector, the pullback that occurred towards the end of last week was inevitable.
The Australian market responded in similar fashion to Thursday night’s meltdown in the US with the S&P/ASX 200 Information Technology index (XIJ) falling more than 100 points or roughly 6% to close at 1736 points.
The broader S&P/ASX 200 index (XJO) fell 187 points or 3% to close at 5926 points.
Market darlings that were dumped unceremoniously included Afterpay (ASX: APT), Xero (ASX: XRO), Wisetech (ASX: WTC) and Appen (ASX: APX).
Buy now, pay later stock Sezzle (ASX:SZL) which was attempting to ride on the coattails of Afterpay has been smashed in the last week, falling from $11.34 to Friday’s close of $7.65.
Based on its share price of 37 cents in March, Sezzle transformed into a 30-bagger in less than six months, but as the old saying goes ‘if it sounds too good to be true, it usually is’.
The biotech sector was also sold down heavily along with some of the big banks and miners, suggesting our market may be on the verge of a reality check as investors finally acknowledge the economic implications of COVID.
Overseas markets continued to tumble on Friday night after the ASX closed, and with the SPI200 futures index down 36 points to 5875 points it would appear that there are further losses on the horizon.
It is worth noting that the sharp decline in US markets on Thursday and Friday followed the S&P 500 and the NASDAQ hitting all-time highs on Wednesday and the Dow drawing very close to matching its all-time high struck in February.
Consequently, there is no debate over whether we have experienced a bubble, it is now case of whether it will quickly burst or slowly deflate as equilibrium returns.
The upcoming presidential election will create broader uncertainty, and of course October is always a jittery month being the anniversary of so many big crashes.
Conversely, the other school of thought is that sustained low interest rates due to fiscal stimulus will continue to place a lid on interest rates, effectively driving funds into equities where better returns are available.
My guess is that the money taken off the table last week is likely to stay on the side lines at least until after the election with the likelihood of more investors taking the same cautious approach in coming months.
If this is the case, Australian investors could see short-term pain before the potential to snare stocks at opportunistic prices when the ASX gains stability towards the end of the year, a time when we are also going to be better positioned to assess the real implications COVID has had on consumers, businesses and the country’s economy.
Where are overseas markets heading
Looking briefly at how the various regions responded on Friday, falls in the Asia-Pacific region were much more measured than Australia with the Hang Seng the worst affected as it declined 312 points or 1.2% to close at 24,695 points.
European markets haven’t fared too badly with the FTSE 100 down about 200 points on a week on week basis, closing at 5800 points on Friday.
Across the channel, it was Germany that felt the pinch with the DAX falling from about 13,400 points on Thursday to close at 12,842 points on Friday.
However, just as the US has run the hardest in recent months it delivered the biggest falls with the highflying NASDAQ index crashing from more than 12,000 points prior to markets opening on Thursday to hit 10,875 points on Friday before recovering some of the lost ground later in the day to close at 11,313 points.
Because of the company representation in the S&P 500 index, it should exhibit more resilience but the index fell nearly 7% from 3588 points to 3351 points before closing at 3427 points.
The Brent Crude Oil Continuous Contract fell with the broader market coming off its mid-week high of about US$46 per barrel to close at US$42.66 per barrel.
Despite the uncertainty, there was little movement in the gold price towards the end of the week as it traded around the US$1940 per ounce mark on Thursday and Friday.
The iron ore price was only marginally affected as it continued to hold just below US$130 per tonne.
Base metals finished the week on a positive note with copper being the standout performer as it hit a new long-term high of US$3.07 per pound.
The Australian dollar finished the week just shy of US$0.73, down about 1.3% on a week on week basis.
General Information Only
S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.
Conflicts of Interest Notice
S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.
Publication Notice and Disclaimer
The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.
Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.
This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.