Uncertainty around inflation and interest rates continue to rise with another rate rise in Australia this week. Also, as Karl Siegling from Cadence Capital points out, this week saw the first signs of some quite serious gold buying by central banks, meaning gold may finally come into its own. The strength in materials stocks and cash flows on energy stocks continues and the capital raises again this week are largely smaller resources and energy stocks. Also bidding for these style of stocks by ‘smart money’, as Karl puts it, adds credence to the idea that these are the sectors you want to be in. The gap between performance of large cap stocks and mid and small cap stocks continues with large cap outperforming and the chasm between the performance of small cap resources and energy versus small cap industrial has become even wider. Small cap and mid cap Australian growth stocks continue to get ‘smashed’. Cadence is looking at City Chic (CCX) which now looks to be trading below written down inventory value. Also China this week may have become a ‘reopen trade’ A2M, TWE, SM1 a lot stronger.
