Yesterday, overnight Aussie time, all the major US and European share indexes closed well into the green. So what does this mean for ASX shares?
The tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) gained 0.54%, closing at another new record high.
That will be good news for investors in Betashares NASDAQ 100 ETF (ASX: NDQ).
The ASX-listed exchange traded fund (ETF) comprises the 100 largest, non-financial businesses on the Nasdaq. Its top holdings include all the FAANG stocks and a host of other household names.
Year-to-date, the share price is up 20.3%. Yesterday the ETF closed at $25.61 per share. That's 1.4% below its own record high of $26.01 per share set on 21 July. At time of writing it's down 0.3%.
Betashares NASDAQ 100 ETF long ago caught the attention of The Motley Fool's own Scott Phillips. On 22 June 2017, he recommended the stock to members of his Share Advisor service. Since then the share price is up 92.4%. By comparison, the wider Nasdaq index is up 75.5%, demonstrating the outperformance of the technology sector's biggest players.
And in case you're wondering, Scott remains bullish on this ETF, believing most of the big technology stocks it holds have further growth ahead.
ASX share market shoots higher in morning trade
At time of writing, the ASX share market is following the global share market rally. In mid-morning trading, the S&P/ASX 200 Index (ASX: XJO), comprising Australia's largest 200 listed companies by market cap, was up 0.7% before dropping to 0.4% at midday.
And Australia's own technology shares are helping fuel the gains. While the COVID-19 shutdowns have negatively impacted numerous stocks, many tech-focused companies have actually benefitted from the shift to working, shopping and socialising from home.
A recently launched ETF, the Betashares S&P/ASX Australian Technology ETF (ASX: ATEC), aims to help investors capitalise on this trend. The ETF is up 23% since first trading on the ASX on 4 March and up 87% since its 23 March low.
Why it's still a good time to buy ASX shares
If, like many investors, you've been sitting on the sidelines watching the markets rocket since their mid-March lows, I don't believe you should let the recent gains scare you from picking up some of your favourite shares.
Candice Bangsund, portfolio manager of global asset allocation at Fiera Capital Corp, sheds some light on why not. As quoted by Bloomberg, Bangsund commented:
Stock markets in general have been underpinned by expectations for further stimulus out of the US. The second-quarter earnings season has also lent some notable support and helped to counteract some of the fears about the latest resurgence in Covid cases.
US lawmakers are still debating the exact size and nature of the next stimulus package, which is expected to pump an additional US$1 trillion to US$3 trillion into the economy. They often go down to the wire with these debates. But it's highly unlikely they won't deliver a new big wave of stimulus. And they're getting pressure from some powerful players.
Like Federal Reserve Bank of Cleveland president Loretta Mester, who sits on the federal open market committee, which makes the decisions on US interest rates and growth of the money supply.
As Bloomberg reports, Mester says it's clear that "more fiscal support is needed to provide a bridge for households, small businesses, and state and local municipalities that have borne the brunt of the economic shutdown until the recovery is sustainably in place."
Fiscal support, if you're wondering, involves government spending and taxation. Monetary support is provided by central banks by setting interest rates and guiding the amount of money in their economies.
Meanwhile, back in Oz…
The Reserve Bank of Australia backs its words with actions
On Tuesday, Reserve Bank of Australia (RBA) Governor Philip Lowe said the bank would resume buying bonds to keep the yields on three-year bonds from rising above 0.25%. He noted that "further purchases will be undertaken as necessary."
Yesterday, the RBA backed its words with action. The Australian Financial Review reports:
The Reserve Bank's first foray into the bond market in more than three months had its desired effect as the central bank scooped up $500 million of three-year government bonds on Wednesday at a yield only slightly higher than its 0.25 per cent target.
That's a half billion dollars, folks. Though it pales in comparison to the $3 billion to $5 billion per day of bonds the RBA was snapping up in the latter days of March. Yesterday's purchase brings the RBA's total holdings of government bonds to almost $52 billion.
With Lowe promising "further purchases … as necessary", you can expect that figure to grow.
And with central banks and governments doing whatever it takes to keep their economies afloat, I expect some of the biggest beneficiaries should be ASX shares.
