The big news this week, which I’m sure you’d have struggled to miss, was the Fed’s back step on the tightening cycle. After falling for the first half of the week, markets rallied on the news that the Fed had adjusted their ‘dot plot’ to tell us that rate rises will be coming through more slowly. Given the recent inflation data showing core inflation above 2% on an annualised basis, and the possibility of rising oil prices (or at least not falling as much), I can’t help but question if this just means they’ll be forced to raise rates faster later on. Closer to home, the ABS’s latest labour force data showed both unemployment and the participation rates had been flat on a trend basis, at 5.8% and 65.1% respectively. We’ve got a short week next week, so why not catch up on this week’s events on Livewire before you start to wind down pre-Easter?
1) Mergers and Acquisitions are hot at the moment, it seems that those who aren’t buying assets are selling them. Anthony Aboud manages Perpetual’s ‘Share Plus’ long/short fund, so he studies both the good and the bad acquisitions to look for opportunities. I found this piece very practical, as even if you’re not looking to take short positions yourself, it offers a great guide for what to avoid. He finishes up by explaining what a good acquisition should look like. Some great tips in here that investors can put into their strategy. (VIEW LINK)
2) Given the rally in resources stocks so far this year, a lot of investors are now asking themselves if we’ve seen the bottom of the cycle. While the sharp rally did seem to overshoot somewhat, it’s hard to deny that there seems to have been a change in sentiment towards the sector. As Hedley Widdup, Fund Manager at Lion Selection Group, put it; “It appears that investors broadly have changed their view of miners, and the realisations that miners are 1) cheap and 2) probably have very little downside on price, have now set in – It would be very hard to “un-realise” that.” This insightful piece really helped to clarify in my own head what’s going on in the resources market right now. (VIEW LINK)
3) It’s generally not easy to go against the crowd and buy genuinely cheap stocks which nobody else wants a bar of, but to be a successful value investor you need to do just that. It can feel lonely at times being a contrarian; Steve Johnson from Forager Funds shared a reminder that uncertainty is essential in order for opportunity to appear. The most interesting point I thought was that by the time the uncertainty has disappeared, so has the opportunity. (VIEW LINK)
This week I caught up with Nathan Bell, Head of Research at Peters MacGregor. He had some great advice on how you can prepare yourself to take advantage of the next big market crash – whenever that may be. (VIEW LINK)
We hope you enjoyed Livewire this week. As always, good luck in the markets next week.
The inflation rate will be an interesting measure to keep an eye on over the next 12 months. If this rally in commodity prices turns out to be the beginning of of a sustained commodities resurgence, that would challenge to the notion that disinflation or deflation and low interest rates are the 'new normal'.
Good point, you could argue simply finding stability would do the same