Let’s begin with a recap of what we discussed last week:
- You shouldn’t short these property / REIT stocks because you think the property market is weak
- These stocks have a lot of momentum in terms of their capital gains this year
- There is a strong correlation with these stocks and the general market
- There is an inverse relationship with property / REIT / dividend heavy stocks and the risk-free rate (which is commonly referred to as the US-10 year treasury yields)
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- If you’re new to UNIT or unsure about where your commerce degree can take you – come to our networking panel night – whether you want to meet the team, talk about your career interests or 1v1 me in a stock debate
In terms of stock prices:
- GMG finished the week up 2.5%.
- GPT finished the week up 1.3%.
- The ASX 200 was up 1.0%.
- The US-10 year treasury yields edged lower from 1.85% to 1.74%
No surprises and all things going according to plan
In terms of the value proposition content for your debates – i.e. talking about what the company does, why they are a good investment, future prospects etc. I believe our week 1 debates adequately cover these aspects.
Between this week and last week, the companies did not release any announcements that may have moved the share price. The price movements are largely driven by the general market and the movement of risk-free related assets.
On the topic of portfolio weighting and where students should allocate their capital to for this week – it appears as though US markets were sold down on Friday after a report that a Chinese delegation had cancelled plans to visit farms in Montana as a part of its negotiations with the US.
The progress of US-China trade talks is absolutely pivotal to how global equity markets will perform. While this is not an escalation of trade matters, it is a negative sign that shows progression is perhaps lackluster. This sentiment or potential escalation could flow into the Australian markets for next week.
With the markets soaring this week, I would advise against a portfolio that is 100% long and to consider some short positions on either property or financials.
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