Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
ASX budget bounce, IPOs closing in
ASX budget bounce, a long list of winners, IPOs closing in, US markets hit one month high
The ASX 200 (ASX:XJO) overcame a weak lead form the US to deliver its strongest budget bounce since 2002, jumping 1.3%.
It will likely take several weeks to digest the true implications of this budget, particularly those sectors that missed out. But today, it was all about the consumer, property and banking sector.
Both the discretionary and staples sectors rallied 2.2%, with furniture retailer Temple and Webster Ltd (ASX:TPW) and Woolworths (ASX:WOW) identified as key beneficiaries, adding 9.5% and 2.0% respectively.
Initial estimates suggest that the announced tax cuts will add $6.9 billion to disposable incomes in 2021, it’s yet to be seen whether consumers will have the confidence to spend this or will increase savings in line with the post-GFC experience.
The banking sector benefitted from the jobs-focused budget and hopes that the Victorian economy may be returning to normal, with ANZ Banking Group Ltd (ASX:ANZ) leading the way, up 2.4%.
In my view, the budget was good news for an economy that needs a real injection, but lacked the real innovation and leadership required to push the Australian economy into the future.
The biggest losers, more inflows for Magellan Financial Group (ASX:MFG), has property bottomed?
Whilst there were plenty of winners from, there are a number of clear losers, with the travel and leisure sector offered little in the way of support. As highlighted on last night’s coverage, there is little value in tax write-offs if you don’t have any revenue.
Qantas Ltd (ASX:QAN) fell 0.6% on the news, whilst Flight Centre Ltd (ASX:FLT) remains under pressure, falling 0.7% despite hopes of intra-Australian travel returning sooner rather than later.
The other clear beneficiary has been trade and construction exposed businesses, or those with substantial capital requirements.
Recycling and waste management group Cleanaway Ltd (ASX:CWY) rallied 4.8% on hopes of a boost to residential construction and Seek Ltd (ASX:SEK) added 4.2% as job advertisements are expected to rise following the $200 per week trade credit announced.
I’m not confident enough is being done to boost those businesses that have been devastating by the lockdowns, particularly smaller retailers, restaurants and tourism providers, nor that the changes will be sufficient to offset the expected reduction in immigration in the years ahead. Only time will tell.
The tweets continue, triggering new highs, spotlight on ANT Financial
President Trump got straight back to work unleashing a series of tweets around one off stimulus payments.
He flagged support for the beleaguered airline sector and another one off stimulus cheque, that he would sign off personally.
The result was a risk on mood, the S&P 500 finishing 1.7% higher and the Nasdaq 1.9%, near one month highs.
Just fifty one companies fell on the S&P 500 with the pressure focused on real estate and energy utilities.
The White House has also ramped up pressure on the impending IPO of mega fintech ANT Financial, owned by Alibaba Inc. (NYSE:BABA) indicating it has been seeking options to restrict the sharing of payment information, similar to its restrictions on We Chat, owned by Tencent.
The difficulty remains in working out how this is possible and legal, hence both share prices headed higher, by 2.9% and 1.4% respectively.
Levi Strauss (NYSE:LEVI) delivered an earnings update highlighting its strong online growth, 50% for the quarter, as consumers seem to be pivoting from active wear to casual wear.
