Seven ASX stocks to outperform the bear market rally: Macquarie

The Morning Wrap

Livewire Markets

Welcome to Charts and Caffeine - Livewire's pre-market open news and analysis wrap. We'll get you across the overnight session and share our best insights to get you better set for the investing day ahead.


  • S&P 500 - 3,655 (-1.08%)
  • NASDAQ - 11,254 (-0.51%)
  • CBOE VIX - 32.26
  • USD INDEX - 114.09
  • US 10YR - 3.926%
  • FTSE 100 - 7,021 (+0.03%)
  • STOXX 600 - 388.74 (-0.43%)
  • UK 10YR - 4.285%
  • GOLD - US$1622/oz
  • WTI CRUDE - US$76.40/bbl


Before we do anything, we need to talk about the British Pound. The currency of the United Kingdom broke through multi-decade lows before reaching record lows in the Asian session yesterday. In the last year, it's lost 30 pence of its value against the US Dollar. But rather than me spit stats out at you, I'm just going to mic drop this chart:

GBP/USD vs USD Index (Source: Trading View)

Why the sudden drop? It's all been fuelled by new UK Chancellor (read: Treasurer) Kwasi Kwarteng's mini-Budget which turned out to be anything but a placeholder. Kwarteng, under new boss Liz Truss, instituted a whole suite of tax cuts to make the cost of living crisis easier in the UK. The only problem? Not only did people not believe him, but traders also didn't know if the UK is going to be able to pay for it.

There is now a slew of bets on whether the Pound will hit parity or worse. And some speculate the Bank of England will have to hold an unprecedented emergency meeting to hike interest rates to cool the Pound's collapse. The Pound has not been this bad since the abolishment of the Bretton Woods system in 1971, as this chart from Bloomberg's John Authers shows:

Source: John Authers/Bloomberg

Watch this space. I know currencies aren't always a top topic on this website, but this time, it may matter more than you think.  


Mester would have already spoken by the time you see this - but two more important Fedspeakers are still coming. (Source: Forex Factory)

A quiet one tonight, but only interesting in the sense that Federal Reserve Chair Jerome Powell is speaking at a forum on digital currencies. Why fight inflation when you can create an e-US Dollar, right?


It's all about bear market rallies today, with Macquarie believing there are more coming. Specifically, analysts believe that another new low will be breached before the next bear market rally. As of the ASX 200 close yesterday, that level is likely to be the one recorded on June 20th (around the 6,433 level). I won't get into technical analysis, deferring that to my learned colleague Chris Conway (who writes this report on Fridays.)

But bear market rallies are something we have all become accustomed to in the last year or so. In the US, the average bear market rally return for the Dow Jones Industrial Average is 15.6%, with returns rising as the bear market progresses. The analysts' research suggests rallies tend to start when prices are 20% or more below the long-term trend. BMRs end at or near the long-term trend or key retracements (sometimes 50% above the relative lows.)

So what does that mean for Australia? Here, P/Es have been falling but are still not near recession levels. But the ASX is also an outlier in that there have been fewer EPS revisions (negative ones) here than in the US. Nonetheless, analysts have worked out seven stocks that have outperformed during recent declines - and these are the ones they back to outperform the most during the fall-to-bear market rally stage.

Public enemy number one.

Today's chart is all about inflation - but this time, it's about how past inflation cycles have affected the path for interest rates. BofA put out this chart on the number of years it takes for headline inflation figures to return to target zones (in most cases, 2-3%). And I hate to break it to you - the history suggests it won't be easy or quick. 

Then again, so many people have said this time is different. So maybe this time will be different again.


Enough said.

Hans Lee wrote today's report.


If you've enjoyed this edition, hit follow on this profile to know when we post new content, and click the like button so we know what you enjoy reading.

If you have a chart and/or a stat that you would like to see featured in a future edition of the newsletter, drop us a note at

Livewire gives readers access to information and educational content provided by financial services professionals and companies (“Livewire Contributors”). Livewire does not operate under an Australian financial services licence and relies on the exemption available under section 911A(2)(eb) of the Corporations Act 2001 (Cth) in respect of any advice given. Any advice on this site is general in nature and does not take into consideration your objectives, financial situation or needs. Before making a decision please consider these and any relevant Product Disclosure Statement. Livewire has commercial relationships with some Livewire Contributors.

1 contributor mentioned

The Morning Wrap
Markets Wrap
Livewire Markets

Livewire and Market Index's pre-opening bell news and analysis wrap. Available weekday mornings and written by Chris Conway, Kerry Sun, and Hans Lee.

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.


Please sign in to comment on this wire.