Weekend Wrap: Back to square one

Hi there!

C'mon Scotty, where's ya "asymmetric information"?

(On Tuesday, US Treasury Secretary Scott Bessent warned traders that he had "asymmetric information", boldly claiming "I am the house now. You can bet against me if you want." By Friday, the US 30-year was on a three-day run, up 13 bps to 5.37%, the highest since July 2007.)

As Coolabah's Christopher Joye puts it: "After tripling his bond purchases, US Treasury Secretary Bessent is having his ass handed to him by a brutal bond market." And so are the rest of us. If anyone needs me, you'll find me at the nearest Maccas drive-through.

What a slog. The ASX 200 is back to breakeven for the year, and in hindsight the warning signs were everywhere. Bond yields have been in breakout mode since early September, the US-Iran situation never really improved, and global central banks were never really dovish. Something had to give, and it was never going to be yields, oil or rates.

Local tech is back in the dumpster after a short-lived revival, rate-sensitive sectors like Discretionary, Real Estate and Telcos are down double digits, and mining bulls are asking whether the commodity complex can handle what's coming.

That said, how good is the weather? (In Melbourne, at least, or was, wait yeah nah it’s still good)

Let's dive in.

The week ended 13-Sep flagged a complete reversal, and the fastest one-week collapse in optimism since the survey began in March 2025. Bulls fell from 43.9% (87th percentile) to 29.7% (26th percentile). Violent mean reversion with no trend has been a recurring theme since July. Two or three bullish weeks, then suddenly it feels like equities are going to zero. Maybe the takeaway here is to not read too much into any single week.

Over the next three months, do you expect the Australian stock market to be:

• Bullish

• Neutral

• Bearish

I had a few things I wanted to talk about this week, but honestly, the market's outlook now rests on a handful of highly correlated factors, and they all trace back to Iran and oil.

• Hormuz and the tanker war remain the centre of the escalation, with the US tightening its blockade and Iran trying to break it. Observed vessel counts suggest the strait is shut, but traders estimate 7 to 8 million barrels a day were still crossing in late August, and the emerging tanker war may reflect Tehran's effort to stop that flow.

• Four alternative routes are carrying much of the displaced volume, being the Saudi pipeline, the UAE's Fujairah, Omani ports and the Iraq-Turkey pipeline. Houthi attacks have already hit Saudi exports and Iran has signalled it may widen restrictions beyond Hormuz, so more upside risk to energy it seems.

• The Houthis took Mocha on Thursday and are advancing south toward Dhubab, putting them in reach of Bab al-Mandeb, which at 29km is narrower than the 34km Strait of Hormuz. Defence analyst Wolfgang Pusztai said the group could control the waterway with artillery alone, without needing missiles or drones.

• US refined product markets are tightening fast, with diesel futures above US$5 a gallon for the first time since April 2022, retail diesel nearing US$6 a gallon and European gasoil approaching US$200 a barrel. The EIA projects US diesel inventories will fall this month to the lowest in more than two decades.

• Fed pricing has shifted hard, with the probability of a 25 basis point hike now at 71.3% against 49.4% a week ago, and year-end pricing favouring two hikes at 48.1% versus 32.5%. But does a hike even matter? The Fed can hike, slowing the economy and taking some pressure off the long end. Or, it can hold, and the long end will do the tightening instead (much more painful).

• A move through 5% on the 10-year would mark a threshold for the US$32tn Treasury market and for Bessent, who has struggled to arrest the selloff ahead of the midterms, with US mortgage rates already at their highest in over a year. Have you ever seen a stock trading at like 96 cents and you feel almost convinced it’ll hit that nicely rounded $1.00? Well this is what 5% feels like. And it's not good.

Barring real progress towards a Hormuz reopening, and so far we have only seen rumours, all these key drivers are spiralling out of control.

Here are some of my favourite reads from our friends at Livewire (including one by yours truly).

• Copper, Rio and BHP fall as Trump wavers on tariffs: Reuters reporting that US refined copper tariffs are still undecided, knocking LME copper 3% and Comex almost 5%. David Tuckwell says if the tariffs are shelved, copper could fall another 10%.

• Where to next after the SaaSpocalypse snapback? Forager's Steve Johnson says results are undercutting the AI disruption thesis, with Bravura and Catapult driving returns. Plenty of good software names still sit well below their highs.

• Buy Buy Buy: 11 hot commodity stocks: No holds, no sells. Romano Sala Tenna and Emanuel Datt pitch picks across precious metals, bulks, base metals, battery materials and energy, from Ramelius and Westgold to NexGen and New Hope.

• Buying something for nothing: GWR, Delta Lithium, Patronus and MGX all trade at or below their cash, with the ground valued at zero. Leverage if the market ever ascribes value, but it often doesn't.

• 2 ASX dividend stocks to watch: Ampol lifted its full-year dividend more than 400% and Virgin paid a maiden 7.6cps. Solaris says specials have replaced off-market buybacks, but you need to own them before the announcement.