Australian fund managers are pulling their hair out. A mini bull market is mostly sending share prices higher which for the long-only funds should be a good thing.
These are the same stocks whose valuations should be most impacted by the interest rate rises, according to the textbooks at least, and a lot of fund managers refused to buy them when official interest rates were at or near zero, let alone now that they have risen sharply. The story is playing out in the Australian market, which has had a much more bullish tailwind since the US CPI print that landed on July 13. That showed inflation was lower than expected, and helped consolidate the risk-on attitude in global markets. Australia’s CPI result one week later was also lower than expected, and kept the bullish spirits alive., Xero, NextDC and Technology One – which is up 8.1 per cent in the past month, more than four times the ASX 200’s 1.9 per cent gain.
That tension should provide an interesting backdrop to reporting season, traditionally the busiest time of the year for share trading. The bulls and the bears will likely look for and find their separate sets of data points, only confirming their quite different biases. It is like the 18 months to mid-2021 all over again, when tech stocks roared. There could be some strong share price reactions, as we have already seen at Credit Corp and Silver Lake Resources.