ASX 200 shares to watch Wednesday: WES, NAB & ANZ

The Australian share market and ASX 200 (ASX: XJO) is set to open lower despite the NASDAQ 100 hitting an all-time high overnight. Here’s what you need to know…

The short squeeze?

The ASX 200 notched up a sixth straight day of gains, taking the run to over 6% as it finished up 2.4% on Tuesday following the public holiday in Victoria. Some experts have suggested it is a ‘short squeeze’ with the likes of National Australia Bank and ANZ Banking Group both up over 5%.

As has been the case during this market rally, the cyclical sectors of energy, financials and consumer/travel businesses rallied the hardest, with healthcare and technology feeling the brunt of the so-called rotation to value.

Wesfarmers provided an update on sales at its ubiquitous Bunnings and Officeworks store network, neither of which closed during the COVID-19 shutdown, with the former seeing sales increase 19.2% and the latter 27.8%. The company has solidified its position as a core long-term holding for portfolios post the outbreak, but we are still waiting on some ideas about its expected acquisitions before making a conviction call.

Featured video: what QVG’s Josh Clark, CFA would tell his younger self

Is the dream rally ending?

Overnight, it looks like this incredible stock market rally may be coming to an end, as investors become wary of inflated valuations with an outlook for contracted earnings. The S&P500 fell 0.8% overnight and the Dow Jones (.DJI) 1.1% as consolidation and profit-taking swept the markets.

It was a similar story in Europe with the Euro Stoxx and FTSE 100 falling 1.4% and 2%, respectively.

The global technology sector remains a key beneficiary of the rally with the Nasdaq hitting another record high as Apple added 3.1% after announcing it will be utilising its own chips in future MacBook models. Closer to home and accounting disrupter Xero dropped 6% on expectations its core smaller business market may be hit hardest and take longer to recover following COVID shutdowns.

Revaluation in the face of uncertainty

A simple google of the words ‘ASX’ and ‘cost-cutting’ results in hundreds of updates on ASX-listed companies, each of which will be seeking to reduce costs and staff numbers in an effort to sustain profits post-COVID-19.

Is this likely to be the biggest trend of the recovery? A resetting of costs as companies take the opportunity to remove ‘fat’ and boost operating margins? Take for instance Qantas Airways, which is expected to cut its costs from $4.2 billion to just $2.0 billion in 2021 as it seeks to remain profitable in this ‘new normal’.

Apply a similar cost-cutting policy to the banking and retail sectors as business embrace technology and e-commerce wholeheartedly and it becomes clear that unemployment may be a risk. On this, G8 Education managed to rally another 8% on Tuesday despite the Federal Government removing Job Keeper payments for employees of child care providers in an approved service.

GPT Group downgraded the value of its High Point shopping centre by 13.6% as rent payments remain in arrears whilst Charter Hall has been one of the few companies on the front foot, acquiring an NSW logistics property for $115 million.

Income starved investors looking for yield in property assets need to be selective and our preference would be more of the latter not the former with more pain to come.

This report was written by Drew Meredith, Financial Adviser and Director of Wattle Partners. To get in contact with Drew, click here to visit the Wattle Partners website.

[ls_content_block id=”695″ para=”paragraphs”]

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report — or get it emailed to you — for FREE by CLICKING HERE NOW or the button below.

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.