FNArena’s Weekly Insights – March 08 2021

In today’s Weekly Insights:

-Will The Fed Tame The Beast?
-Conviction Calls
-FNArena Talks

Will The Fed Tame The Beast?

By Rudi Filapek-Vandyck, Editor FNArena

In a share market that is as bifurcated as the ASX, leading indices such as the ASX200 or the All Ordinaries no longer show investors the true picture of what is going on.

On a three-month view, share market indices have shown increased volatility but on balance the direction has remained upwards with the ASX200 moving away from 6600 as many times as it was able to, only to be pulled back towards it an equal number of times, sometimes in quite a violent manner.

On Monday, Australia’s leading index closed at 6739.60, which is pretty much in the middle of the 6600-6900 trading range that has kep the local market in check since late last year.

Underneath all that day-to-day volatility, however, lays a gamut of portfolios and market positions that are bleeding profusely and in a lot of pain as share prices for companies including Cochlear ((COH)), Nanosonics ((NAN)), Altium ((ALU)) and Coles ((COL)), to name but a few, are trading well below levels witnessed last year.

The easy explanation that roams the internet these days is “rising bond yields”, oft with an extra reference to previously bloated valuations and, in some cases, a disappointing operational performance revealed in February.

It is why shares in Magellan Financial ((MFG)) are now down more than -36% from last year’s high, and the damage has even been greater for Bravura Solutions ((BVS)), or for Appen ((APX)), while the likes of Afterpay ((APT)) and Zip Co ((Z1P)) are rapidly catching up, so to speak.

The easy explanation, however, is only part of what is inflicting so much pain on market segments outside of this year’s re-opening and reflation trades. While many an expert had been reflecting upon the likelihood of higher bond yields for 2021 and possibly beyond, very few would have anticipated we’d be witnessing the 10-year bond in Australia aiming for 2% by the end of February (the RBA temporarily put a stop to it).

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