ASX 200 (XJO) Monday – Nasdaq delivers worst week since March

The S&P/ASX 200 (ASX: XJO) is expected to open flat this morning according to ASX futures. Here’s what’s making headlines.

ASX 200 recap

The ASX 200 fell to a nine-week low on Friday before finishing down 0.8% for the day and 1.1% for the week; making it the fourth straight week of losses.

The selling pressure was centred around financials, falling 1.2%, as geopolitical confrontations with China have increased investor anxiety. Healthcare remains the safe haven, CSL Limited (ASX: CSL) and Cochlear Limited (ASX: COH) finishing 0.5% and 1.1% higher, respectively.

Governance issues were front of mind once again, with Rio Tinto Limited (ASX: RIO) announcing CEO Jean-Sébastien Jacques, its Head of Iron Ore and Chief of Corporate Affairs, would step down following the damning inquiry into the destruction of the 25,000-year-old Juukan Gorge. This is a major scalp in the push for greater executive accountability and strong governance. The Rio Tinto share price slightly outperformed the market on Friday, finishing down 0.6%.

Meanwhile, Australia’s financial services companies continued to face questions from politicians, the likes of AMP Limited (ASX: AMP), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd (ASX: NAB) grilled on harassment and cultural issues over several days in a sign of the times ahead.

Featured video: The Australian Investors Podcast ft. Chris Judd

Nasdaq delivers worst week since March

The Nasdaq fell 0.8% on Friday, down 4.6% for the week making it the worst performance since March. The S&P 500fared comparatively better, finishing flat on Friday but down a more palatable 2.5% for the shortened week.

The performance comes after an 11% intra-week fall to start September but a gain of close to 60% from the March lows; putting the weakness into context.

After being blamed for the incredible August rally, Softbank Group Corp. (TYO: 9984) CEO Masayoshi Son suggested his aggressive options trading in the major technology names may be put on hold following recent losses.

Elsewhere, it appears the glass ceiling may have finally been broken with Wall Street investment bank, Citigroup Inc.(NYSE: C) announcing a woman, Jane Fraser, as its next Chief Executive on Thursday, the first such announcement from a major Wall Street bank in history

My three takeaways from the week

As per usual, here are my three key takeaways from the week:

ESG takes centre stage

Announcements from BHP Group Ltd (ASX: BHP), Rio Tinto and AMP in recent weeks have seen ESG or Environmental, Social and Governance issues become centre stage for both boards and investors; some would say about time.

Thus far, the pandemic has hit the most vulnerable people the hardest, with a combined effort between governments and the private sector required to have any hope of returning the global economy to its previous state. This will require companies to consider all stakeholders, not just shareholder profits.

Beware the froth

The tech sell-off and similar weakness in ASX buy now, pay later shares once again confirmed that valuations can overheat and that investors must beware the froth by refusing to follow popular momentum and high-risk strategies.

Nuance required

This leads to my final thought, the growing importance of ‘nuance’ when investing in 2020 and beyond. Broad brush views like ‘sharemarkets are overvalued’, ‘value outperforms growth’ and ‘tech is in a bubble’ are great headlines but offer little insight into the inner workings of the companies they represent.

In the coming months and years, performance will be driven by a willingness to look deeper, beyond the headlines to find the best options from across the world.

This article 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.

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Disclosure: At the time of writing, Drew owns shares of CSL.

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