Wednesday's Weekly Wrap

Economy and Indices

The AU market is going somewhere; down. To the tune of -1.28% for the last week.

That negative move is pulling the market out of the sideways channel experienced over the last three to four months.

Clients of many years will know that in times like this we look for the market to fall, to capitulate on the old investment themes. As all seems lost, we look for the next market leaders to emerge from the ashes. Within those ashes, we find the next market leaders to invest in.

At this stage – we continue to lighten our exposure and wait for our time to strike.

Leading Sectors This Week

1. Energy +3.0% - being the only positive Sector

Bottom Sectors

1. Telcos -3.3%

2. Info Tech -3.3%

Segments this Week

Safety, albeit comparatively, has been in the blue chips, only down -0.7%

Mid caps continue to be the worst performers, in contrast to the first half of 2017, down -1.5%

This week’s fall in the AU share market has been a “Beta-Fall”, where the largest companies, the Blue Chips, fell the most,

The remaining segments are a mixed bag this week, although all are down.

The best performing companies were mentioned in the most recent episode of Talking Stock.

Market Trends

The AU continues the converging pattern since the start of 2017, as the chart below shows the narrowing black lines.

The black lines in the chart show that all of the sectors of the Australian market are converging to where they started the year – except Telcoms (brown line in red circle), being driven down by Telstra’s loss of ‘investment grade’ from most self-directed investors.

There have been strong performers within the AU market, however these companies are the exception to the rule and do not show up on the above chart, indecies and most media publishers.

Some are lithium miners, mining services, smaller technology companies and wealth managers.

For more insights into the top performers, watch Talking Stock or my interviews with Rudi Filapek Vandyck .

Outlook

While there is no conviction in the current market leaders, we’re keeping trading positions light and will wait for a more dramatic wash-out or market fall. After such events, we look for the new leaders to emerge because, statistically, that’s when our approach to markets generate the best returns.

More

For insights on how to use these trends and themes within a portfolio, watch The Portfolio Series here.