Good afternoon,
The ASX 200 added 1.62% for the week with Industrials dominating Resources.
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Midcap and small cap stocks continued to outperform the top 20 - it's been a theme of the market recovery.
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I'll never tell you the market is going to crash
Plenty of clients and advisers that I talk to each week are still finding it hard to invest. Ironically, while I keep hearing this sort of talk, it makes me more confident to keep investing. As I've said before, without elevated volatility its much harder to generate elevated returns... they just go hand in hand.
This week a client rang thinking the market was going to crash again. I managed to allay their fears with logic but it still puts someone like me in an unenviable position, let me explain.
Lets say the market does crash next week - the client is going to blame you for the loss they incur.
But if the market doesn't crash, they aren't going to ring up and thank you. They are just going to go about their business as they normally would and forget they ever made the phone call.
It's the easy road to just agree with your clients and let them sell. If the market falls, everyone's happy. If it keeps going up, the client only has themselves to blame... but unfortunately, this easy road doesn't result in the best client outcomes.
I've written it many times, but you can't time markets consistently. You might get lucky, you might be unlucky, but it doesn't change the data. Nobody knows if the market is going up, down or sideways with any degree of certainty in the very short run.
I have clients trying to tell me all the time, they are "nervous" about the market, they want to hold more cash, they want to try and buy things cheaper and for every time the clients are right, there's 100 times that they are wrong. The problem is, generally, clients don't understand/study their own biases, they don't know what they don't know and often, just simply want to believe what they already believe to be true.
Personally, and how I advise clients, is just keep it simple. Set your asset allocation based on your risk profile and return requirements and leave it alone. If making as much money as possible is your goal, go as hard as you can at growth assets while maintaining great sleep quality. But be consistent. Constantly changing your strategy or allocation to the market is dumb and eats away at your long term returns in my experience. You might get lucky, you might not, but regardless of the outcome, the dice is still loaded against you.
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Spotify (SPOT, +54% over last 12 months)
....and I still have readers whinge every few weeks that you don't get enough stock tips in this note. You know the idea is to make money, not read the most opinions?
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Movers & Shakers
Loving this market if I'm honest. Might be the best trading/alpha generating period of my career to date. Appen, Breville, TPG, NextDC all overweight positions in our ASX200 model portfolio (+11.14% since 6 May).
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Not too much to worry about on the downside this week unless you own Pilbara Minerals or Mayne Pharma.
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REITs going ex-div before June 30, plenty of yield on offer and there is some value on offer still in some of those names (ARF, SCG both screen well on my analysis).
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Shorts getting ACTIVE in SXL and JIN (now suspended). I don't like seeing the shorts increase in Reliance (RWC) as the EOFY comes to a close, while value plays BEN, CGF, AWC etc. dominate the shorts being covered.
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I'll be having a quiet wine on the couch tonight with Claire and watching the Eagles bouce back against the Lions (last week's loss against the Gold Coast was almost caused a scarf-burning!) Pretty excited for the F1 and the NBA (even though my Minnesota Timberwolves aren't playing) to get back going again.
Have a good weekend, well, what's left of it. Sorry the note's a bit late. You know, sometimes I get busy running a business.
LL
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Luke Laretive
CEO & Investment Adviser
T +61 3 8639 1601 | M 0451 122 656 | lukel@senecafs.com.au
Level 2 Professional Chambers
120 Collins Street Melbourne VIC 3000
AFSL No. 492686 |
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