Contrarian calls – BHP and IAG

Chief Investment Officer and founder of Aitken Investment Management
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Key points

  • Expect more volatility but not as much as recent weeks.
  • Iron ore price could have bottomed for the year and BHP offers good exposure.
  • IAG could also benefit from Medibank IPO hype.

What’s catching my eye?

1. The awful events in Ottawa ↓
2. AT&T downgrading revenue forecasts ↓
3. US oil inventories rising ↓
4. The EURO ↓
5. US dollar index ↑
6. VIX ↑
7. Gold ↓
8. Boeing ↓
9. Interest in the Medibank Private IPO ↑
10. The lack of inflation in the world ↔

There’s certainly no lack of volatility with the combination of strong bellwether US earnings and hopes of European Central Bank action driving the biggest percentage gain for the S&P500 all year, earlier this week. It was actually the biggest daily points gain since 2011. What a difference a week makes since the Dow’s - 460 point intraday swoon, which actually was the knife sticking.

Ebb and flow

While the VIX has pulled back to 16.2 from a panicky peak last week of 31, it remains elevated versus averages of the last few years and I believe we should position for further volatility, but volatility that is lesser than the wild swings we have seen in the last few weeks.

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