Is the current equity market rally sustainable?

I’m thrilled to reconnect with Andrew Geoghegan from ausbiz, discussing my perspectives and insights once more.

Here is a transcript of the interview.

ANDREW : We’ve just been discussing obviously, what we’re seeing in the States at the moment with, uh, well, essentially it’s all about Nvidia driving the market broadly higher. I mean, how sustainable is that, do you think you look?

ROBERT : It’s a pretty positive environment for equities markets at the moment. Obviously US data continues to be favorable. Um, you know we’re making quite a bit of progress on the CPI front. Um, you know the US Atlanta GDP tracker is looking very solid. Unemployment rates are still very low. Um, and you know, you’d expect given that sort of broader factors doing well, you would expect that to sort of translate that to, to the markets, but unfortunately not that hasn’t been the case. There’s a real gap between sort of winners and losers. You’ve got M&G, save it up here. You’ve got the tech sectors, then the Fangs and then the S&P. So quite a sort of a big gap between those sort of factors. Um, and also you know, the percentage of S&P stocks above their sort of 50 day, uh, you know, average has dipped to under 50%, also suggesting a bit of an uneven market. Um, from that perspective, however, look, we expect to see a broadening out of that rally as we see more earnings come through in this next quarterly earnings season. Um, you know, markets have been very macro dependent. Um, but, you know, we are also seeing a bit of an acceleration in earnings growth data over the next 12 months as well. And in terms of sentiment, it’s actually quite interesting that, you know, the bond, um, bond asset classes have done exceptionally well from a flow perspective. Um, another sort of indication that maybe, you know, there’s a lot of investors out there that have been quite conservative. Um, and, you know, interesting given obviously, you know, that sort of equity market price momentum, um, that we’ve seen in the last, uh, sort of year or two.

AG : So of course, we are approaching the end of the financial year, and that’s a great time to take stock of where your portfolio is sitting at the moment and perhaps look at some readjustment. What should we be cognizant of, do you think?

RT: I think if we go back to sort of what we’re expecting from an earnings as financial year sort of comes to a close. I mean, our Activam and high growth is returned about 18% for the last, uh, you know, almost financial year. Our Activam Balance Fund has done around 14%. So a very, very strong, um, financial year expected. And that’s a great result for obviously rewarding investors who have remained invested in the market. Um, you know, some of the biggest contributors, um, particularly international equities, um, that’s done exceptionally well, up 20% financial year. So not investing in international equities would have been caused a bit of pain. Um, you know the mega Caps as well done exceptionally well around that sort of AI semiconductor and Nvidia as well. And it’s surprisingly the Irish asset class has done exceptionally well over this financial year as well.

AG: All right. That’s looking back looking forward though Robert. Um, which sectors of the market are you liking and which you’re a little more wary of?

RT: I mean, we’ve still kind of like the small cap sectors, I think sort of sort of last year, I think they particularly look attractive. And, you know, we have been allocating to those sectors, um, you know, and although I think there’s still, you know, a lot of the mega caps are doing exceptionally well. Um, we see a little bit more value, um, in those sectors than they should. We expect to do that sort of, I guess, catch up rally going forward. But however, looking in times like this, I think it’s really important to sort of stay a little bit cautious as well. Obviously great environment for equity markets. But you know, we’re also looking at things that might sort of, you know, um, cause markets on the downside. Look obviously Nvidia has been a very big contributor to markets. However, you know, we might sort of if there’s anything that affects that one particular stock obviously that could cause quite a bit of an impact across the market, particularly around if we see a little bit of selling from senior management there, you know, that could obviously cause some issues for that stock. And obviously the overall market, given the dependence on that particular stock.

AG: Regionally, which markets are you referring at the moment?

RT: Look I think you know international equities is doing particularly well. We still like that particular sector the US. Obviously now you’re not going to find that I sort of exposure um like you obviously would in the in the US sector. So I think definitely we’re favoring the US. I know obviously it’s a bit looking a bit fair value from that perspective. I knew I was doing reasonably well, but obviously they’re still having their own issues. On the macro perspective. Look, Australia is doing should do okay. However, I think in a relative sense I think the US equity market should continue to do well.

Click the link to watch the video : https://youtu.be/A3Dvg-1YiC8