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ASX update; ASX 200 higher

Growth assets

Loosening the reins, ASX 200 higher, banks rally, US recovers on stimulus hopes
The ASX 200 (ASX:XJO) staged a stunning recover, finishing the day 1.5% higher leading to a 1.7% improvement for the week.

The financial sector, up 3.7%, contributed over half the recovery on its own, ANZ Banking Group Ltd (ASX:ANZ) and National Australia Bank Ltd (ASX:NAB) adding over 6% after the Treasurer announced that ‘Responsible Lending’ laws established in 2009 would be repealed.

These regulations effectively limited bankers discretion on assessing the spending habits of borrowers and according to source have been a handbrake on loan applications in recent years.

The change bodes well for stability in the property market, particularly when combined with all-time low borrowing rates.

The materials sector also recovered, adding 1.9%, as iron ore and the gold price improved, but finished the week down 2.3%.

Newcrest Mining Ltd (ASX:NCM), up 3%, lead the way with the USD gold price fall offset by a 3% fall in the AUD over the week. As highlighted Washington H Soul Pattison (ASX:SOL) and Service Stream Ltd (ASX:SSM) lead the market, +14.4% and 12.2% on company specific news.
Calling for more stimulus, stay at home trade finished higher, cruising into 2021
It was another mixed week for US markets, the S&P 500 finished 0.6% lower despite a 1.6% recovery on Friday, as signs of a slower economic recovery hit confidence.

Once again, the Nasdaq outperformed, 1.9% higher for the week and up 2.3% on Friday, as discussions on another $2.2 trillion stimulus package recommenced.

Markets remains mixed, with the so-called ‘stay at home’ trade including Microsoft (NASDAQ:MSFT) and Zoom Video Communications (NASDAQ:ZM) benefitting from economic restrictions.

On the other hand, more cyclical businesses including energy and financials had another tough week as COVID-19 cases continue to spike on both sides of the Atlantic.

The leisure cruising sector rebounded on Friday, Carnival Cruises (NYSE:CCL) up 9.7% after research house Barclay’s suggested the sector may be nearing an end to restrictions as they institute extensive safety policies.

Back in Australia, the Solomon Lew run Premier Investments Ltd (ASX:PMV) reported record online sales of $220 million, a 49% increase which contributed to a 29% increase in profit for the financial year to $138 million.
Climate and energy policy in focus, deficits the new normal, volatility is just beginning
My three takeaways this week start with the renewed focus on climate and energy policy.

Whether it was the Federal Government putting forward an ambitious energy policy and innovation agenda or Wesfarmers Ltd (ASX:WES) it’s clear that the post pandemic recovery will be powered by a push to a more sustainable economy.

Something we discussed on our podcast during the week. As highlighted by ex-Prime Minister Paul Keating during the week, if there has ever been a time to for the Government to run deficits it is now.

Keating aggressively put forward the case for a focus on saving jobs by any means necessary, putting pressure on the RBA to do much more.

It is this willingness to undertake fiscal stimulus that will determine which countries recover more quickly from the second and subsequent waves of the virus.

Finally, it’s clear that volatility is just beginning. After several months of strong recovery, the ‘wall of worry’ lies ahead as economies continue to diverge.

In this environment alternative assets will play an important role, but not all are created equal.

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In the war over AI’s future, the big guns may have already won

Large language models like ChatGPT are part of a long technology continuum driven by Moore’s law, the observation that transistor capacity doubles every two years. To get in on AI’s surging growth, says Munro Partners’ Nick Griffin, investors should focus on the big – and not-so-big – names already poised to come out on top in the “race to shrink”.

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