Volatile markets see many investors still sticking to cash

The S&P500 had its worst day in two years on Tuesday after monthly U.S. CPI data dashed hopes that inflation had peaked and reminded investors that the path to monetary tightening is likely to remain steep.

The ASX200 had a similarly awful day, falling almost 3% at the open on Wednesday and closing down more than 2.5%. It stabilized on Thursday, but the current level of volatility is actually flat for five days. Investors could be forgiven for finding them exhausting; volumes are relatively modest compared to previous periods when the market fell by similar amounts.

Clearly, many have realized that “buying the dip” is not a reliable strategy; alternatively, the drop just wasn’t big enough to tempt many to part with their cash!

ASX200 (XJO) for five days

For those who were ready to get out and play on Wednesday morning, the Vanguard Australian Shares ETF (VAS) was a huge buy, over 95% off the cost. This became an ongoing trend during the days when the US markets took heavy hits overnight; investors want to buy the index at a discount and increase their holdings. The average size of this trade is not very large, as it is usually an accumulation strategy, not an all-in.

More bullish investors bought hedge fund Betashares Strong Bear (BBOZ), as well as ETF Securities Ultra Short Nasdaq Hedge Fund (SNAS), for the first time the latter was published in large editions. A smaller number bought international indices.

For those looking to stay with straight stocks, materials remain the most popular sector by a wide margin. While Fortescue Metals Group (FMG) is the gift that keeps on giving to those closely following the iron ore price, Pilbara Minerals (please) continues to trade in huge volumes. The stock has tumbled through its 52-week high and barely held its breath in recent weeks, providing big returns for a wide range of holders.

Pilbara Minerals (PLS) shares over 12 months

South32 (S32), which rarely hits high numbers, saw huge buying on Thursday after falling more than 7% when it went ex-dividend. Lithium stocks remain hot, and Lake Resources (LKE), Allkem (AKE) and Core Lithium (CXO) is still finding buyers.

Weakness usually attracts buyers for the financial sector; interesting Macquarie Group (MQG) and Magellan Financial Group (MFG) were the top two choices. Magellan has been under sustained pressure over the past 18 months, with no rebound in the share price, although it is about 10% off recent lows. Many are hoping that the worst news has been priced in and there is room for the firm and the stock to recover from this point.

Shares of Magellan Financial Group (MFG) 12 months

In international markets, recent volatility has given dedicated traders the opportunity to make directional bets on the US market. Oil, semiconductors and even China ETFs are trading heavily as traders look to profit from volatile markets.