Tag: Motley Fool

We’re still fairly new to 2023, despite the first month just passing us by. But what a year it has been for the ASX share market thus far. Since the start of 2023, the S&P/ASX 200 Index (ASX: XJO) has rallied by an impressive 8.35%. But that doesn’t mean we shouldn’t be thinking about which ASX 200 dividend shares to buy next.

Overall, shares go up far more often than they go down. So if we’re always waiting for a cheap time to enter the market, we could be waiting years. And that’s years of valuable dividend compounding we could miss out on.

So here is where I would think about deploying $20,000 in ASX dividend shares this year if I was lucky enough to have some cash fall in my lap.

2 ASX 200 dividend shares I would buy in 2023

National Australia Bank Ltd (ASX: NAB)

I already own some NAB shares, but I would happily buy more in 2023 with some of that $20,000. Under NAB’s CEO Ross McEwan, I think this ASX bank share has built itself into one of the best options out of the big four.

Unlike its rival Commonwealth Bank of Australia (ASX: CBA), NAB is less reliant on the massive mortgage market, with its historical focus on business lending. As such, I consider it to be a classic blue-chip investment that should prosper alongside the Australian economy over time.

There’s also NAB’s fat, fully franked 4.8% dividend yield to consider as well. This comes from NAB jacking up its dividends meaningfully in 2022. The bank paid out $1.27 in dividends per share in 2021, but hiked this to $1.51 per share last year.

Harvey Norman Holdings Limited (ASX: HVN).

Of all the ASX 200 dividend shares out there, Harvey Norman would have to be one of the cheapest on the market today. The veteran ASX retailer currently trades with a price-to-earnings (P/E) multiple of just 6.9. That’s stupendously cheap for a long-term stalwart like Harvey Norman in my view.

This cheap share price has resulted in the company possessing a monstrous trailing dividend yield of 8.42%, based on the company raising its dividend from 35 cents per share in 2021 to 37.5 cents per share in 2022. Those dividends come fully franked too. So this ASX 200 share I would find hard to turn down as well.

The post How I’d invest $20,000 in ASX 200 dividend shares in 2023 appeared first on The Motley Fool Australia.

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More reading

• Up 37% in 12 months: Here’s why this fundie still sees value in Woodside shares
• 3 ASX 200 tech shares going gangbusters on Thursday
• Why is the AFIC share price tumbling 2% on Thursday?
• Why I’m preparing now for a 2023 stock market correction
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor Sebastian Bowen has positions in National Australia Bank. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Harvey Norman. The Motley Fool Australia has positions in and has recommended Harvey Norman. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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S&P/ASX 300 Index (ASX: XKO) uranium share Deep Yellow Ltd (ASX: DYL) is charging higher today.

Shares in the uranium miner were up 7.8% in earlier trade today and remain up 5.5% at the time of writing.

Here’s what’s driving investor interest in the ASX 300 uranium share.

What did Deep Yellow report?

The Deep Yellow share price is soaring after the miner reported that its “highly positive” Definitive Feasibility Study (DFS) at its Tumas uranium project in Namibia has been completed.

Deep Yellow noted that the DFS, compared to the earlier Pre-Feasibility Study (PFS), resulted in increased production capacity of its plant from 3 Mlbpa of uranium (U3O8) to 3.6 Mlbpa U3O8, a 20% increase. The plant’s throughput also increased by 11% from the PFS, to 4.15Mtpa from the prior 3.75Mtpa.

Atop uranium, the DFS indicated annual production capacity of 1.15 Mlb V2O5, a vanadium by-product.

Based on existing ore reserves, the project Life of Mine (LOM) currently stands at 22.25 years. But the ASX 300 uranium share expects that to increase to 30-plus years amid additional future resources.

Commenting on the DFS results, CEO John Borshoff said:

We believe this is a very robust DFS and underscores the value of our conviction to apply effort in contrarian fashion, with a proven team, to discover the expanded Tumas Project that now demonstrates its potential to be a long-life, world-class uranium operation.

Importantly, we have used appropriate assumptions and our costings are highly accurate, having been largely based on quotes received in the last quarter of 2022 and in January 2023, resulting in a very realistic outcome against the inflationary and supply headwinds that have hit the mining sector.

Borshoff expects Deep Yellow’s application for a Mining Licence will be granted by mid-2023. The company is awaiting the Environmental Impact Assessment and approval by the authorities.

On the sustainability front, Borshoff added:

We intend for Tumas to be a best-in-breed uranium operation with world-leading extractive technologies and sustainability initiatives applied, including a specific process route that will produce a benign tailings stream to allow for the eventual safe closure and rehabilitation.

Deep Yellow said it will now focus on detailed Front End Engineering and Design, project financing, and product offtakes ahead of a Final Investment Decision expected in the first half of 2024.

How has this ASX 300 uranium share been tracking?

As you can see in the below chart, the Deep Yellow share price is off to a cracking start in 2023, up 16%.

The post ASX 300 uranium Deep Yellow share just surged 7%. Here’s why appeared first on The Motley Fool Australia.

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More reading

• CSL share price surges to new 52-week high on Thursday
• The ASX 200 jumped 6% in January. Analysts reveal what this could mean for the rest of 2023
• ASX 200 investors are selling off CBA shares! What should I do?
• Meta stock price rockets 19% on $56 billion buyback
• Here’s the Fortescue dividend forecast through to 2025

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It has been another positive session for the CSL Limited (ASX: CSL) share price.

At the time of writing, the biotherapeutics company’s shares are up 1% to a 52-week high of $304.75.

As you can see below, this means the CSL share price is now up 16% since this time last year.

Why is the CSL share price hitting a 52-week high?

As well as getting a boost from a rising share market today, investors have been buying the company’s shares due to the release of a series of positive broker notes.

One of those came from Morgans yesterday, with its analysts adding CSL to its best ideas list for February. Morgans has an add rating and $312.20 price target on its shares.

The broker believes that 2023 could be the break-out year for CSL after facing some challenging times during the pandemic. The broker commented:

A key portfolio holding and key sector pick, we believe CSL is poised to break-out this year, a COVID exit trade, offering double-digit recovery in earnings growth as plasma collections increase, new products get approved and influenza vaccine uptake increases around ongoing concerns about respiratory viruses, with shares offering good value trading around its long term forward multiple of 31.5x.

Elsewhere, analysts at Morgan Stanley believe the CSL share price can climb even higher. Yesterday, the broker reiterated its overweight rating and $354.00 price target. This implies potential upside of 16% from its 52-week high.

All in all, this could just be one of many new 52-week highs the company’s shares make in 2023 if Morgan Stanley is on the money with its recommendation.

The post CSL share price surges to new 52-week high on Thursday appeared first on The Motley Fool Australia.

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More reading

• How I’d invest $20k in ASX 200 shares in 2023 to aim for a million
• Should I buy CSL shares before this month’s earnings update?
• ‘Incredibly cheap’: 2 ‘strong’ ASX shares expert would pounce on right now
• 3 ASX shares I dream of owning at the right price
• Jun Bei Liu’s 2 ‘structural growth’ ASX shares to buy now

Motley Fool contributor James Mickleboro has positions in CSL. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The S&P/ASX 200 Index (ASX: XJO) is off to a smashing start in 2023.

In January, the benchmark index gained a stellar 6.2%. That marks its best first month of the year ever.

And with the first two days of February also delivering gains, the ASX 200 is now up 7.2% since the closing bell on 30 December.

That strength has been driven by a resilient Australian economy and early signs that inflation is easing across the developed world. Meaning investors might expect a more dovish stance from the RBA, the Fed, and other leading central banks.

But with those outsized gains already booked, what can ASX 200 investors expect for the rest of 2023?

A bullish outlook for ASX 200 shares

A strong January performance historically tends to support strong share market performance for the remainder of the year.

According to Bell Potter analyst Richard Coppleson (courtesy of The Australian), investors can look forward to a positive share market performance – with an average gain of 7.5% – 73% of the time when the All Ordinaries Index (ASX: XAO) gains at least 6.5% in January.

The All Ords came within a whisker of that, gaining 6.43% in January. It’s currently up 7.38% in 2023.

Wilsons Advisory analyst David Cassidy points to China’s reopening as offering some healthy tailwinds for ASX 200 shares. Cassidy is also optimistic that easing inflation could see the RBA and Fed cut interest rates.

Markets should also be supported by resilient consumers and the potential for the RBA to deliver a soft landing for the Aussie economy.

According to Cassidy:

Consumers continue to spend at a decent clip. This is supportive for the local sharemarket, though sector-specific headwinds in respect of mining – from a frothy iron ore price – and banking – from slowing revenue growth – will likely cap the degree of upside for the local market this year.

Sounding a note of caution for the ASX 200

Former treasurer and current chair of the Future Fund Peter Costello makes the case for ASX 200 investors to think defensively in 2023.

Costello says interest rates are still going up, inflation remains well above central bank target ranges, and investors should not ignore the downside risks of a potential global recession.

“Real returns to investors, with the context of significant inflation, will be substantially below the experience of recent years,” he said (quoted by The Australian).

“The cycle of rising rates to control inflation is not yet complete and brings with it the possibility of recessions in much of the developed world.”

Foolish takeaway

We know that the ASX 200 has had its best start to the year in its history.

We can only speculate on how the benchmark index will finish out the rest of the year.

But we do know that some stocks will widely outperform the pack while others trail.

Invest wisely.

The post The ASX 200 jumped 6% in January. Analysts reveal what this could mean for the rest of 2023 appeared first on The Motley Fool Australia.

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More reading

• ASX 200 investors are selling off CBA shares! What should I do?
• Meta stock price rockets 19% on $56 billion buyback
• Here’s the Fortescue dividend forecast through to 2025
• Up 37% in 12 months: Here’s why this fundie still sees value in Woodside shares
• 3 ASX 200 tech shares going gangbusters on Thursday

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Commonwealth Bank of Australia (ASX: CBA) shares have been on form again this week.

So much so, Australia’s largest bank’s shares climbed to a record high of $110.81 on Wednesday.

This means the CBA share price now up 16% since this time last year.

Have CBA shares peaked?

Interestingly, it appears as though some retail investors have started to take profit on the belief that CBA’s shares may have peaked.

According to CommSec data, Commonwealth Bank was the 14th most traded ASX share on its platform last week.

However, only 26% of trades involving the bank were buys. The remaining 74% of trades were CommSec customers selling the bank’s shares.

And given that CommSec is the most widely used brokerage platform in Australia, this is arguably a fair representation of what’s happening across other platforms.

What are brokers saying?

The broker community is likely to be supportive of this profit taking. At present, I’m not aware of a single broker with a buy rating on the bank’s shares.

One of the most positive brokers out there is UBS with its neutral rating. However, with a price target of $100.00, CBA shares are trading 10% ahead of this level.

Elsewhere, Goldman Sachs is one of the more bearish brokers with its sell rating and $91.60 price target. This suggests that the banking giant’s shares could tumble almost 24% from current levels.

Goldman believes that the company’s shares don’t deserve to trade at such a premium to the rest of the big four banks. Particularly given the sector headwinds it is facing. Last month, it commented:

We are Sell rated on CBA given: i) while operating trends remain strong with volume growth best amongst the major bank peer group , and ii) CBA has the best leverage of the major banks to higher rates, iii) it is also more exposed to sector wide headwinds such as intense mortgage price competition, as well as further potential macro downside that appears likely to more adversely impact the household this cycle. Overall, we do not believe its fundamentals justify the 12-mo forward PER premium it is currently trading on versus peers, compared to the 19% historic average.

Food for thought for CBA shareholders.

The post ASX 200 investors are selling off CBA shares! What should I do? appeared first on The Motley Fool Australia.

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More reading

• Top ASX dividend shares to buy in February 2023
• 5 ASX 200 shares smashing new 52-week highs on Wednesday
• CBA share price hits new record high again on Tuesday
• Why did the CBA share price just hit a new 52-week high?
• Investing in ASX 200 bank shares? Here’s the dividend outlook for 2023

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The US markets had a very pleasing day of trading last night (our time). By the end of the trading day, the S&P 500 Index has risen by 1.05%, while the NASDAQ 100 was up an even rosier 2.16%. But let’s talk about the Meta Platforms Inc (NASDAQ: META) stock price.

Meta, the company formerly known as Facebook, looked like it had a pretty decent day on the surface. The company closed at US$153.12 a share, up a robust 2.79%. But in after-hours trading, the story was dramatically different.

By the time after-hours trading finished up, Meta shares had risen by a whopping 19.81% all the way up to US$183.45 each.

So what was behind this dramatic jump in value?

Well, the company’s latest earnings report, of course.

Meta has been under intense pressure over the past two years or so. Between September 2021 and November 2022, the company’s shares fell from close to US$380 to just over US$88. That’s a fall of over 76%:

Ouch.

Investor concerns ranged from increased competition to Meta’s social media apps like Facebook and Instagram from rivals like TikTok to Meta’s ambitious and expansive plans to expand into the ‘metaverse‘.

But it appears that the company’s latest quarterly earnings report has restored a lot of faith.

Meta stock jumps, but why?

But, initially, it’s not too easy to see why.

Meta reported falls in revenue, income and earnings per share (EPS) for the quarter ending 31 December 2022. Against the prior corresponding quarter, the company’s revenue fell 4% to US$32.17 billion. Net income dropped 55% from US$10.29 billion to US$4.65 billion. Diluted EPS also fell, sliding from US$3.67 per share to US$1.76.

The only positive metric was a big reduction in costs and expenses. These dropped from US$12.59 billion for the three months to December 2021 to US$6.4 billion for the three months to 31 December 2022.

So what then has gotten investors so excited with Meta shares?

The company has announced a massive increase to its share buyback program.

Meta reported that over the quarter just gone, the company bought back US$6.91 billion of its own stock. That took 2022’s annual total to US$27.93 billion, with US$10.87 billion left in the kitty for further buybacks.

But Meta announced this morning that it would be increasing its funds available for buybacks by a whopping US$40 billion ($56 billion).

Investors love share buybacks because they reduce the total share count of a company. This has the effect of reducing supply, therefore pushing up share prices over time. Further, a reduced share count increases earnings per share, since there are fewer shares to divide a company’s earnings amongst.

So it’s this monster expansion to Meta’s share buyback program that has probably gotten investors so hot under the collar for Meta stock.

The post Meta stock price rockets 19% on $56 billion buyback appeared first on The Motley Fool Australia.

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More reading

• 3 ASX 200 tech shares going gangbusters on Thursday
• What to watch on the US stock market this week: ANZ
• Why Fortescue shares could be facing a Meta-like problem

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen has positions in Meta Platforms. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Meta Platforms. The Motley Fool Australia has recommended Meta Platforms. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Fortescue Metals Group Limited (ASX: FMG) dividend is a popular option for income-seeking investors.

And it isn’t hard to see why, given the tens of billions of dollars of dividends that the mining giant has dished out to its shareholders in recent years.

For example, in FY 2022, Fortescue paid a fully franked A$3.58 per share dividend, which represents total dividends of US$6.7 billion.

But will the big dividends be sticking around? Let’s take a look at what one leading broker is expecting from the iron ore miner.

Fortescue dividend forecast

According to a note out of Morgans this week, its analysts believe the Fortescue dividend has peaked and is now on a rapid descent. This is due largely to the company’s Fortescue Future Industries business and its decarbonisation plans.

After polluting the world for a couple of decades, Fortescue is now aiming to help the environment. But this will come at a significant cost and weigh on its free cash flow. Morgans commented:

Significant capex is still to come from FMG’s decarbonisation spend and various projects targeting FID in CY23. FMG expects to fund this spending through its iron ore cash flow, which sees its FCF yield reducing significantly over the next few years, and increasing its sensitivity to any unexpected market volatility.

Morgans is expecting this to lead to the miner paying a 92.9 US cents (129.9 Australian cents) per share fully franked dividend in FY 2023. Based on the current Fortescue share price of $22.39, this will mean a 5.8% dividend yield.

Looking to FY 2024, Morgans expects the Fortescue dividend to almost halve to 54.8 US cents (76.7 Australian cents) per share. This equates to a fully franked dividend yield of 3.4% for investors.

Unfortunately, the broker expects things to get even worse in FY 2025 and has pencilled in a 22.2 US cents (31 Australian cents) per share dividend that year. This would mean a paltry yield of 1.4%.

In light of this bleak dividend forecast, it will come as little surprise to learn that Morgans has the equivalent of a sell rating on Fortescue’s shares.

It currently has a reduce rating with a $15.60 price target, which implies potential downside of approximately 30%.

The post Here’s the Fortescue dividend forecast through to 2025 appeared first on The Motley Fool Australia.

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More reading

• Will funding FFI drag the Fortescue share price lower?
• Broker warns that the Fortescue share price could crash 39% from current levels
• Has the Fortescue share price topped out?
• Fortescue share price hits 52-week high on record half
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The ASX share market has a range of high-yielding ASX dividend shares across banking, retail and resources. These are good for high levels of passive income. But there aren’t many with long consecutive annual dividend growth records.

There are a group of businesses in the US that have increased their dividends every year for more than 25 years. They are called dividend aristocrats. Examples include McDonald’s, Coca Cola, Procter & Gamble, and S&P Global.

On the ASX, there aren’t any names that have managed to do that, though the investment house Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is getting very close, having increased its dividend every year since 2000.

This article is going to be about two ASX dividend shares that could pay (growing) dividends for many years ahead. I’m looking for businesses that could achieve resilient cash flow and that could enable the dividend payments to keep flowing.

Shaver Shop Group Ltd (ASX: SSG)

Shaver Shop has increased its dividend every year since 2017, meaning it kept increasing during COVID-19.

It currently has a grossed-up dividend yield of 11.7% after a payment of 10 cents per share in FY22. The numbers on Commsec suggest that the business could grow the dividend and pay 10.5 cents per share in FY23, translating into a grossed-up dividend yield of 12.3%.

By FY25, the business could pay an annual dividend per share of 12 cents, which be a grossed-up dividend yield of 14%.

This business doesn’t just sell advanced shavers, clippers and trimmers, and wet shave items, it also sells products across oral care, hair care, massage, air purity treatment, and beauty categories.

Shaver Shop is expanding its product ranges, growing its store network, benefiting from scale and selling the latest products.

I think people are going to keep shaving, even if fashion trends do change over time. In my opinion, this could be one of the underrated ASX passive income ideas with a market capitalisation under $1 billion.

Brickworks Limited (ASX: BKW)

Brickworks is the largest brickmaker in Australia and the northeast of the US. It recently signed a deal to start sending large quantities of bricks to the UK as well. The business also sells other building products in Australia, such as roofing, masonry, and cement.

But, the parts that make it an interesting dividend idea are its other assets.

It owns a large chunk of Soul Pattinson shares, which gives Brickworks a steady and growing stream of dividend cash flow to fund its own dividend. Plus, Soul Pattinson is achieving capital growth for Brickworks as well.

Brickworks also has a growing industrial property trust which it owns alongside Goodman Group (ASX: GMG). The idea is to build high-quality warehouses on excess land that Brickworks no longer needs. This unlocks the potential value of the land, plus creates strong rental cash flow. I think businesses will always need good logistics locations (warehouses), so this property trust could do well for many years ahead, helping the passive income.

The Soul Pattinson dividend and property trust rental income essentially funds the Brickworks dividend, with building product earnings being a bonus.

Brickworks has grown its dividend each year since 2014 and hasn’t cut its dividend for more than 40 years.

It currently offers a grossed-up dividend yield of 3.7%.

The post Can these next-gen dividend heroes provide a passive income for life? appeared first on The Motley Fool Australia.

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More reading

• The ASX 200 is still full of cheap shares despite this year’s surge and I’m ready to buy more
• ASX passive income: My game plan to reach $30,000 per year
• Which ASX dividend shares I’d buy now to target $50,000 of annual passive income
• ASX income stocks: A once-in-a-decade chance to get rich?
• My ASX shares fell 15% last year. Here’s what I’m doing now

Motley Fool contributor Tristan Harrison has positions in Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2024 $47.50 calls on Coca-Cola. The Motley Fool Australia has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Goodman Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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While the Australian share market typically provides investors with an average dividend yield of 4%, income investors don’t have to settle for that.

That’s because a number of ASX 200 shares are forecast to deliver even greater yields to investors in 2023.

Here are three ASX 200 shares with 6%+ forecast yields:

Charter Hall Retail REIT (ASX: CQR)

Analysts at Citi are positive on this supermarket anchored neighbourhood and sub-regional shopping centre markets-focused property company. Last month, the broker put a buy rating and $4.30 price target on its shares.

Citi is expecting the company to be in a position to increase its dividend to 26 cents per share in FY 2023. Based on the current Charter Hall Retail REIT share price, this will mean a 6.3% yield for investors.

New Hope Corporation Limited (ASX: NHC)

This coal miner has been tipped to reward its shareholders with some very big dividends in the near term.

For example, according to another recent note out of Citi, its analysts are forecasting fully franked dividends per share of $1.84 in FY 2023. Based on the current New Hope share price of $5.82, this will mean a mammoth 31% dividend yield for investors.

Citi also sees upside potential for New Hope’s shares with its buy rating and $6.70 price target.

Pilbara Minerals Ltd (ASX: PLS)

Lithium shares aren’t just about growth anymore. The team at Macquarie expect this ASX 200 lithium giant to return a decent portion of its free cash flow to shareholders this year. It is partly for this reason that Macquarie has an outperform rating and $7.50 price target on Pilbara Minerals’ shares.

As for dividends, the broker is forecasting a 30 cents per share dividend in FY 2023. This equates to a 7.2% dividend yield at current levels.

The post Dividend forecasts: 3 ASX 200 shares with 6%+ yields appeared first on The Motley Fool Australia.

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More reading

• Should I buy ASX 200 lithium shares now or not?
• Jeremy Grantham just warned shares could crash 50%, but did he also suggest lithium stocks may have “a substantial advantage” over the long-term?
• The Pilbara Minerals share price has rocketed! Have I left it too late to buy?
• These were the best performing ASX 200 shares in January
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The S&P/ASX 200 Index (ASX: XJO) is off to a smashing start today.

Again.

In early trade, the benchmark index is up 0.58%.

That puts the ASX 200 up a remarkable 7.2% so far in 2023.

The latest push higher comes with a hearty thanks to the United States Federal Reserve.

ASX 200 charges higher on Fed rate call

Yesterday, overnight Aussie time, the Fed opted to raise the official US interest rate by 0.25%. That brings the Fed target rate to 4.75%.

Like the ASX 200 today, US markets celebrated the announcement. The S&P 500 rallied on the news, closing up 1.1% overnight. Tech stocks fared even better, with the NASDAQ Composite Index closing up 2%.

While markets are generally averse to rate hikes, the 0.25% increase comes after a 0.5% hike in December and four earlier 0.75% increases.

The more subdued hike this week comes as Fed chair Jerome Powell indicated inflation pressures are showing signs of easing. Though he warned a few more rate increases were on the horizon.

“We think we’ve covered a lot of ground. Even so, we have more work to do,” Powell said following the announcement.

“Restoring price stability will likely require maintaining a restrictive stance for some time,” he added.

The ASX 200 is following the bullish lead of US markets despite the prospect of more rate increases and higher rates “for some time” yet.

According to a statement released by the Fed, “The committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time.”

What the experts are saying

Commenting on the Fed’s decision that’s helping push the ASX 200 higher today, co-founder of EQM Indexes Jane Edmondson said (courtesy of Bloomberg):

Markets seemed to be shrugging off the Fed’s tough talk and celebrating that the rate hikes are smaller, and the end is in sight given that inflationary pressures seem to be abating. Still room for a soft landing that avoids a recession. I think the fact that the job market and corporate earnings have survived all these rate hikes is a testimony to underlying strength of the economy.

Chief global strategist for LPL Financial Quincy Krosby added:

Powell’s comments, so far, have been more reassuring to the market in that he’s acknowledged that they can possibly reach price stability without harming the labour market to get there. Moreover, he’s laid out a clear roadmap for what the Fed is increasingly focused on, that is, disinflation to reach services.

Head of US economic research at Renaissance Macro Research LLC Neil Dutta cautioned that the lower increase today could lead to a larger correction down the road.

“Powell has said that financial conditions have tightened considerably despite the fact that they have eased considerably,” he said. “The odds are increasing that the Fed is declaring victory too soon. The Fed’s flirtation with the soft landing today increases the risk of a harder landing later.”

As to how investors in US stocks should respond, partner at Advisors Capital Management JoAnne Feeney said (quoted by Bloomberg), “It remains time to be highly selective because some areas of the economy will contract further, while others continue to grow.”

I reckon the same advice would serve ASX 200 investors well as we move ahead into 2023.

The post ASX 200 leaps ahead on subdued Federal Reserve interest rate hike appeared first on The Motley Fool Australia.

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More reading

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• Dividend forecasts: 3 ASX 200 shares with 6%+ yields
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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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