A sign of increased risk aversion is the stellar performance of the A-REIT index. AREITs are trading at substantial premiums to net asset value as investors bid up stocks with stable cash flows.
Financials are retracing to test their new support level at 5900/6000. Calls from the RBNZ for the big four to increase their capital haven’t helped.
Materials are also retracing but continue their up-trend. Though the iron ore windfall is unlikely to last.
The ASX 200 is heading for a test of resistance at 6300/6350. Expect stubborn resistance, leading to a correction.
I remain cautious on Australian stocks and hold more than 40% in cash and fixed interest in the Australian Growth portfolio.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He founded PVT Capital (AFSL number 546090), which provides income and growth strategies to wholesale clients.
Colin also co-founded Incredible Charts and writes the popular Patient Investor newsletter.
Using a top-down approach, Colin identifies macro trends in the global economy and then combines fundamental and technical analysis to evaluate opportunities in sectors that stand to benefit.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.