Weekly Wrap 12 June

Jessica Amir
June 12, 2020

With Australian and U.S economic data exceeding expectations, the Aussie share market found itself amidst a 3-month high mid week. However, a second wave of COVID-19 cases emerging in the U.S has swung the market lower on Thursday and Friday.

In this week’s wrap, Jessica covers:

  • COVID-19 in the U.S: Texas, Florida & Arizona report spikes in hospitalisation (0:33)
  • Three standout stocks (1:22)
  • How to play defence in your portfolio? (2:26)
  • Two key themes to consider: The rise of online lockdown leisure and; putting the magnifying glass on the rally (3:33)
  • Five lockdown trading ideas – thematic trading (5:36)
  • Mitigating currency risk using a hedged US ETF (6:59)
Read Transcript

Thanks for tuning into the weekly wrap.

I’m Jessica Amir a market analyst with Bell Direct.

Well the Aussie share market has had a volatile week hitting a new 3-month high on Wednesday on better than expected Australian and U.S economic data, before swinging lower on Thursday and Friday with a second wave of COVID-19 emerging in the U.S and president Trump announcing he is kicking off his presidential campaign next week.

Florida and Arizona reported spikes in hospitalizations with Texas reporting three straight record high days of COVID-19 hospitalizations as well, following black lives matter protests.

Now Texas and these other states are now being scrutinized for reopening too soon.

All factors combined saw volatility spike to a four week high with investors pushing for the risk off button, which saw equities track lower for the first time in seven weeks, with the ASX200 losing 3% from Monday to Friday as at midday today.

Now in a typical defensive fashion investors sold down cyclicals taking a 9% haircut off Energy and 6% off Real Estate, while Utilities, Consumer Staples and Healthcare kept the market on the straight and narrow.

Somewhat helping the ASX200 maintain its 27% gain off its bear market bottom.

IPH (ASX:IPH) clocked up 8% this week to $7.71 or there abouts after announcing the purchase of an NZ business called Baldwins Intellectual Property, whichhas already earned NZ$2 million this year.

Now Bell Potter upgraded IPH’s target to $8.70 and Macquarie held its bullish $9.60 target for IPH.

Another standout was the gold business Saracen Minerals (ASX:SAR) shining 5% higher after the gold price rose 3%.

Now that also helped St Barbara (ASX:SBM) rise 2%. Both Gold stocks are backed by Goldman Sachs as buys.

Singling out Saracen Minerals, it’s the first quarter production hit a record also beating expectations.

UBS maintained Saracen as a buy rising its target to $5.35.

Now according to Livewire’s most read stories this week, investors were keen to learn how to play defense with their portfolios.

BetaShares reckons exposure to long dated government debt and hybrids will provide a buffer against market shocks, suggesting ETFs like (ASX:AGVT), (ASX:CRED) and (ASX:HBRD).

Another topic of interest this week has been ‘where will gold go next?’.

Now the gold price is already up 30% this year in U.S dollar terms and one fund manager expecting the gold price to sit at about $2,500 – $3,000 USD in about three years.

Now this year Evolution Mining (ASX:EVN) has already gained a massive 45%, Northern Star (ASX:NST) clocked up 23%. So another way that you might like to invest in gold is via ETFs such as (ASX:QAU), (ASX:GOLD) and (ASX:PMGOLD), they’re just some ideas.

Now for two key themes I’d encourage you to think about next week, well the first one is the rise of online lockdown leisure.

NAB’s research found that gambling spending rose 63% since the start of the year with many taking the punt in their spare time during COVID-19.

Our internet and web broadcasting spending surged 42% with people subscribing to streaming services or updating their computer software.

A recent Deloitte survey found about 70% of people had at least one video streaming subscription, 40% had music subscriptions and 30% used a gaming service.

Now such digital trends will help transform the contact free economy and these trends will be difficult to reverse.

Secondly, putting the magnifying glass on the rally, I’d encourage you to think about that and if it’s time to rebalance your portfolio or start periodically buying into the market.

When you’re a long-term investor, like me, bringing your growth and defensive assets back into alignment is so important as it positions you for an eventual recovery, improves longer term returns and decreases portfolio volatility.

Let’s say if your growth assets shrank in value with the fall in share values and your Defensive investments, Utilities, Staples and Bonds rose in value, or you could take profits from the outperforming investments and then top up the lagging ones.

Now lastly consider some trading ideas, well firstly with the rise of the online leisure industry you might like to remember gambling payouts dropped in the GFC but betting surged!

So why would you gamble your money away when you’re heading into a recession when you can invest it instead?

Well Aristocrat Leisure (ASX:ALL) is the gambling stock to watch.

Now with trading ideas in lockdown, it’s backed as a buy by UBS, Citi, Bell Potter and Goldman Sachs.

Now Aristocrat Leisure’s online casino revenue is tipped to charge after it rose 19% in the half-year helped by mobile gambling.

Morgan Stanley targets $30 and UBS targets $31.80.

Other stocks to consider amid the rise of digital ledger include PointsBet (ASX:PBH) which is a Bell Potter buy, Jumbo Interactive (ASX:JIN) and Nine Entertainment (ASX:NEC) which owns Stan.

Or you could look at other exposures such as the Chinese internet and tech giant Alibaba, wechat and gaming giant Tencent, now to access those you could use an ETF called (ASX:ASIA).

Finally, this week we saw the Aussie dollar swing to an 11-month high against the U.S dollar on Wednesday and then 42.4% on Friday.

So if you’re investing in U.S shares it’s so important to consider how this is affecting your returns.

Now currency risk can be mitigated with a hedged U.S ETF.

The table here shows us the best returns for an unhedged U.S investment is seen when the Aussie dollar goes down against the U.S dollar and US markets go up.

So if you believe the Aussie dollar will go up you could invest in the hedged ETF (ASX:IHVV).

Or if you think the Aussie dollar will go down you could invest in the unhedged ETF (ASX:IVV).

Our clients typically split their U.S investments across both as correctly predicting currency movements over the long term is very difficult to do, but whatever you do do (ASX:IHVV) and (ASX:IVV), will get you exposure to some of the world’s largest and well-known companies including US giants like Apple, Microsoft, Amazon, Google parent Alphabet, Facebook and Johnson & Johnson, et al.

On behalf of everyone here Bell Direct, have a happy and safe weekend.

I’m Jessica Amir we’ll see you next week.

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