The underperformance of Australian shares compared with stocks in the United States is set to continue as investors shrug off record highs on Wall Street to mark Australian shares down on Friday.
The expected fall in the ASX 200 index when trading resumes on the last day of the working week is pinned 0.12% by the June contract of the ASX 200, which was last quoted 11 points below the previous settlement at 8,972 points at the time of writing.
This was despite two of the three main indexes on Wall Street closing at new peaks on Thursday (Friday AEST) for a second successive session.
Burrell Stockbroking wealth adviser Adam Dight saw opportunities for clients to deploy excess liquidity as markets were expected to keep climbing.
“Now it’s a case of follow the money as (U.S.) indices recover. We might be holding 10% cash just in case there’s a pullback,” he said.
“You’ve got 90% of that money that’s risk-on (which) will capture the upside and now you can use the cash to drop feed into the market between now and June 30.
“But what you want to do is have your best portfolio on July 1.”
Noting the outperformance of the Dow Jones Industrial Average (DJIA) compared with the S&P 500 and Nasdaq Composite Indexes in the year to date (YTD), Dight said this reflected a broadening of the recovery by U.S. stocks.
While the S&P and Nasdaq have risen 2-3% in the YTD, similar to the ASX 200, the DJIA has roared to a 21% gain.
He recommended clients invest cash in ASX-listed companies with overseas earnings and consumer cyclicals like JB Hi-Fi Limited (ASX: JBH), Sigma Healthcare (ASX: SIG) and Coles Group (ASX: COL).
The ascent to new records by the S&P 500 and the Nasdaq was attributed to hopes of a resolution to the Middle East conflict being raised by Israel agreeing to a temporary ceasefire with Lebanon and U.S. President Donald Trump indicating the U.S. and Iran could meet again on the weekend.
The Dow Jones Industrial Average gained 0.2%, the S&P 500 added 0.3%, and the Nasdaq Composite put on 0.4% in volatile trading on Thursday.
"You've got markets fluctuating between more positive and slightly neutral headlines," Northlight Asset Management chief investment officer Chris Zaccarelli was quoted saying in this Reuters story.
Australian shares gave up early gains to finish lower on Thursday with the ASX 200 Index losing 0.3% to 8,955.0 points, despite all three major Wall Street benchmarks gaining ground on Wednesday.
In fixed interest markets, yields on Australian Government bonds rose with two-year rates adding 0.04% to 4.666% and 10-year rates putting on 0.18% to 5.012% at the time of writing.
