And so the ‘Sell in May’ period may finally be done. The market as a whole is at record highs, but parts of it, certain sectors don’t necessarily feel that way. Short attacks on many companies, including some we hold in our folio, added to the volatility our portfolio experienced.
The ASX 200 (XJO) briefly traded above 7400 as banks, industrials and healthcare moved higher. Technology was flat. Miners like BHP were down so far this month.
After a spike, crypto stayed true to its volatile character and crashed by 50%. We’ve heard the analogy, when everyone at the BBQ and the Uber drivers are asking about <insert any overhyped asset>, then it’s probably the peak.
It is an interesting time indeed. Are we out of the worst phase of the economic part of this crisis? Read on to find out. Members can also see a 30 minute video from Fahd and Moin, below, analysing our portfolio performance and a deep dive into a company that seems to have currently bottomed.
The ASX VIX (volatility index) has seesawed over May and into June and is currently under 12. Interestingly, the VIX in the US has gone up higher.
Volatility doesn’t necessarily show market direction (up or down) but the range of average price changes over time.
The S&P/ASX 200 VIX Index (XVI) calculates the amount of volatility expected in the market over the next 30 days.
• High readings indicate uncertainty (bearish)
• Normal readings suggest a slight bullish bias
• Low readings indicate low volatility (bullish) and strong investor confidence.
CEO Insights
Aviation
“Airlines will disappear. Weak airlines will become weaker, strong airlines will become stronger and hopefully margins come back to at least pre-crisis margins…So, I think once this crisis is behind us, we’ll look at a more healthy industry”
Carsten Spohr, CEO, Lufthansa AG
Automotive
“We’re seeing nice improvement as it relates to the supply situation, more drivers coming on the road, more supply hours”
Dara Khosrowshahi, CEO, Uber Technologies Inc
“The business continues to benefit from increased use of private vehicles compared to public transport and an increase in domestic drive holidays”
Market Statement, AMA Group Ltd
Workplace & Employment
“Most significantly, unemployment is falling and there are more people employed now than pre-COVID”
Peter King, CEO, Westpac Banking Corporation
“SEEK ANZ continues to benefit from record high levels of SME hiring activity”
Andrew Bassat, CEO, Seek Ltd
“Consumer sentiment has improved, and the Australian economy has largely emerged from the pandemic evidenced by, among other things, rising house prices, the unemployment rate returning to pre-pandemic levels, and job advertisement, at 13 year highs”
Grant Kelley, CEO, Vicinity Centres
“Many companies have downsized these [internal] hiring teams and suddenly, with the end of COVID-19 pandemic in sight, companies may want to hire more people. But because they have already downsized their hiring teams, they need to hire people to be in the hiring team. That’s the situation many companies find right now”
Hisayuki Idekoba, CEO, Recruit Holdings Co Ltd [one of the largest HR/staffing companies in the world]
“People have rebelled, they don’t want to travel two hours to work and two hours back any more”
Harry Triguboff, CEO, Meriton
Telecommunications & Technology
“For markets that are opening up, where people are going back to school, going back to work, returning to their normal life, it appears they’re taking mobile games with them”
Frank Gibeau, CEO, Zynga Inc [multinational mobile videogame company]
“We now see over two-thirds of our bookings come through the mobile devices”
Glen Fogel, CEO, Booking.com Holdings
“Customers are now seeking to transform from a world where data informs people to one in which data drives operations directly. Data drives digital transformation. Data is the beating heart of the modern enterprise”
Frank Slootman, CEO, Snowflake Inc
“The market is only about 25% into this entire cloud journey…what a hybrid [a combination of public & private] cloud environment does is it’s going to start breaking down those barriers to scale that 25% even faster. What barriers am I talking about? Data sovereignty, latency and security and regulatory requirements”
Jim Kavanaugh, CFO, IBM Corporation
Semiconductors
“All of our businesses have more demand than supply. I will argue in the current environment if you’re a semiconductor company and you don’t have more demand than supply, you should be worried about it because we have everything in short [supply]” Cristiano Amon, CEO, Qualcomm Inc [leading global semiconductor manufacturer]
Global Economy
“The business environment has changed sharply, compared to three years ago…The prolonged impact of COVID-19 trade friction between the United States and China and increase in your raw material costs are all having an effect”
Satoshi Tsunakawa, CEO, Toshiba Corporation
Domestic Economy
“The biggest issue we are most anxious about right now is consumer confidence — actually now it is pretty good. But it is hard to believe it will continue”
Brad Banducci, CEO, Woolworths Group Ltd
Residential Property & Households
“I think that people have understood and consumers, homeowners have realised that equipping their home, making it a joyful, a pleasant place to be, is something important that we have learned during the crisis and that will be kept moving forward”
Eric Rondolat, CEO, Signify N.V. [parent company of Philips Lighting/multinational lighting corporation]
Consumer Spending & Retail + E-commerce
“We feel that the next phase of e-commerce revolution will be merchant led. Thousands of new businesses have started during the past year that never even considered a brick-and-mortar store. This changes the shopping equation fundamentally”
Ajay Virmani, CEO, Cargojet Inc [international air freight group]
“Athleisure and fitness consumer trends continued to drive strong [shoe] demand”
Richard Johnson, CEO, Foot Locker Inc
Agriculture, Food & Beverage
“Meat and Livestock Australia has revised down cattle slaughter forecasts to their lowest level in 36 years and a fall of 11% on 2020 levels. The national cattle herd is also coming off its lowest level in 25 years, in 2020”
Hugh Killen, CEO, Australian Agricultural Company
“Australian beef price or selling prices is very, very high”
Wesley Filho, CEO, JBS SA [world’s biggest meat processor]
“The hiring demand [in hospitality] is increasing at a rapid speed…In the past 2 or 3 decades, this is the most difficult period to hire someone”
Hisayuki Idekoba, CEO, Recruit Holdings Co Ltd [one of the largest HR/staffing companies in the world]
Travel, Leisure
“Corporate travel, including the small business segment, is now back to around 65 per cent of pre-COVID levels, and increasing month-on-month”
Alan Joyce, CEO, Qantas Airways Ltd
“This is a global phenomenon…COVID created a step functional change where people who may never have thought about alternative [non-traditional] accommodations, now they’re thinking I want to go to a home that’s not near people, maybe near the beach or near the mountains and I feel safer there”
Glen Fogel, CEO, Booking.com Holdings
“Leisure demand is growing strongly, with deferred international holidays converting into multiple domestic trips”
Market Statement, Qantas Group Ltd
Energy, Raw Materials & Resources
“In the last three months, material prices have gone up further to, I would say, unprecedented levels. I think all basic materials, copper, nickel, zinc, aluminium, they’re all very high double-digit up. I think the most extreme is steel”
Peter Coleman, CEO, Woodside Petroleum LtdNico Delvaux, CEO, ASSA ABLOY [world’s largest lock manufacturer]Peter Coleman, CEO, Woodside Petroleum Ltd
“We have a buoyant and transforming energy sector. It is indeed an incredible moment for us and for the industry…Renewables development is booming and the world is expecting to more than triple its renewable capacity over the next 20 years”
Catherine MacGregor, CEO, ENGIE S.A [world’s biggest independent power producer]
“If you look at the remainder of this year, the demand in China and demand in the rest of the world is really just growing very, very quickly and that makes perfect sense, because when you step back and think about where you’re using aluminium, it’s in transportation, it’s in consumer durables, it’s in electrification, it’s in automotive.”
Roy Harvey, CEO, Alcoa Corporation [top tier global aluminium producer]
Inflation
“We’re seeing very substantial inflation. It’s very interesting. We’re raising prices. People are raising prices to us and it’s being accepted”
Warren Buffett, CEO, Berkshire Hathaway Inc
“Looking ahead, we’re facing a significantly higher inflationary environment. More specifically, we’re seeing increases in commodities, freight and labour costs”
Daniel Servitje, CEO, Grupo Bimbo [world’s largest baked goods conglomerate including Sara Lee]
More updates on the market and highlights video for members follow below.