FNArena’s Weekly Insights – September 21 2020
Dear time-conscious investor: US election remains too uncertain to call; a new strategy for dividend-seekers; plus one under-reported record from the August results season
In this week’s Weekly Insights:
-All Eyes On November 3
-Income Seekers Need A New Strategy
-Time To Say Goodbye
-Stats, Damn Lies, And Corporate Profits?
All Eyes On November 3
By Rudi Filapek-Vandyck, Editor FNArena
The share market is always a collection of different narratives that often exist in opposition to each other.
One of the popular narratives that has attracted quite some attention these days is that tech stocks in the US had become separated from fundamentals and had started to exhibit typical bubble-alike characteristics.
There are pockets on US share markets that definitely lend support to this view.
But there is the equally apposite observation that many of the emerging technology disruptors are genuinely enjoying boom-time conditions, and there is a lot of growth hiding underneath those elevated share prices.
Apart from the fact that we are experiencing mega trend-changes that will reshape society as we know it, and tech stalwarts such as Apple, Microsoft and Alphabet sit very much at the centre of tomorrow’s Brave New World.
Another popular narrative is that Australian shares have been underperforming the US because the ASX doesn’t have equivalents to the American technology-driven market leaders.
Here the opposing narrative, equally accurate, is that covid-19 caused a lot more damage to corporate profits and dividends in Australia than it did elsewhere.
And as I never stop emphasising during my presentations to investors, every reporting season in recent years, time and again, reveals a much weaker performance from the local Top20 than it does for Australian companies in general.
The same observation stands for last month’s August results season during which the performance of local large caps Westpac ((WBC)), Insurance Australia Group ((IAG)) and Telstra ((TLS)) -yet again- stood in sharp contrast to what was achieved elsewhere.
If shares are guided by corporate profits, why would Australian indices rise in tandem with US equities?
US equities have deflated noticeably over the weeks past, which should be expected given the strong rally that preceded, but all-in-all, indices are still above levels of July (go figure!).
Over here in Australia, while some downward pressure is exhibiting itself, if we take a multi-month view it can easily be argued local indices have essentially tracked side-ways since June, in line with lacklustre corporate earnings and economic data hit by a second lockdown in Victoria.
So pick your pick, but I still have to see a genuinely valid reason to become concerned about my exposure to the share market.