Tech breaks down as the Aussie market finds its feet

Your questions, answered

Market wrap

Europe bounced hard: Germany’s DAX is almost back at all-time highs, the FTSE is strong and France looks like it is finding a bottom. The US fell on the midterm results, then finished strongly. A lot of money is moving around, and that should line up good opportunities in the coming weeks and months.

What’s new on the website?

There’s now an ETF overlap calculator that shows what you really own in dollars, by country and sector, and a free portfolio report that checks your core and satellite mix, fees, performance and the trend of each ETF. The Data Desk shows how many ETFs are in an uptrend (low right now) and which are at all-time highs. INCM, the global high dividend aristocrats ETF, just broke out to a new high.

I hold DHHF as my core. Is it still good value, and which satellites would you add now?

DHHF is in a base but holding up well given how tough the market has been, with support holding and a bounce. For the core we want a growth allocation: the funds with less fixed interest have done best over the year. Our satellites are still 100% cash. INCM and VVLU (global value) are near all-time highs, and MVR looks like it is bottoming, but we’re probably two to four weeks from knowing whether these set up properly.

Do the US midterm results change your view on cash for satellites?

No. Nothing has set up yet, so we stay in cash. The market reacted well at first, but tech then sold off hard: Taiwan, Japan and semiconductors look like they’re breaking down. SEMI ran about 96% and has given back about 35% of it. Another week or four should show where the money is flowing.

Has ATEC broken out of its base?

Not yet. It had a strong day but is still in a bottoming base, with resistance around $24.20. It has been sitting near its lows since March. A better sign of rotation was OZXX, the Australian market without financials and resources, which jumped after falling about 20%.

My gold miners ETF was up 10% today. What now?

Gold was massively oversold. QAU (hedged gold) was up about 4.7% and MNRS (hedged gold miners) about 11%. Gold miners are actually stronger than gold because they didn’t break their previous low. They now need time to tighten up and get back above their moving averages, so late November or early December at the earliest. I don’t think the case for gold has changed.

What do you make of CMC and CommSec stopping purchases of crypto ETFs?

That was news to me. I’d heard some banks were restricting payments to crypto exchanges, citing money laundering concerns. I think we’ll see more unusual decisions about what we can do with our own money, which is also part of the case for gold.

Why has ATEC done so badly in a year when tech and AI have powered markets?

Because ATEC has nothing to do with semiconductors or AI. Its top holdings are businesses like Computershare, Pro Medicus, Xero, CAR Group, TechnologyOne, REA and Seek, which are software, platforms or healthcare rather than the tech driving US markets. Some are very good businesses that have been sold off. It’s as good as we get in Australia, but it isn’t an AI play.

We use VDHG and VDGR as our core. Are you cool on VDHG?

Not at all. We just want a growth allocation without much fixed interest. VDAL and DHHF are 100% growth, VDHG is 90/10 and VDGR is 70/30. With bonds under pressure, even a small bond allocation has weighed on returns. I’d rather hold cash than bonds, and VDGR is as defensive as I’d go. A 50/50 conservative fund has done very little.

When the big opportunity in gold comes, gold miners or the metal?

Based on the charts today, gold miners. MNRS held its low while QAU dipped slightly below its previous low. Gold probably led the move, and miners may lead the next one. I also like silver and silver miners (SLVM), but platinum and palladium have been weak.

Could RKET be bottoming after the SpaceX IPO?

It looks terrible and probably needs another six months. I think tech will be on the nose for a while and it’s likely to get political. If I had to make a call, money is rotating out of tech and back into hard assets. FANG is holding its 200-day average but has been weak.

Should I use limit orders or buy at market?

If you’re dollar-cost averaging small amounts, market orders are fine. Just avoid the first 20 to 30 minutes after the 10am open and the last part of the day before 4pm. For large orders, use a limit at the current offer and wait to be filled rather than pushing the price up. The issuer’s website shows an indicative value if you want to check the price.

Besides gold, which once-in-a-generation opportunities are you watching?

Precious metals, resources and hard assets, where supply looks short. Longer term, China could be a huge opportunity, but it hasn’t set up yet. Food and uranium too, and possibly Bitcoin. Themes like hydrogen and clean energy (HGEN, CLNE) show how a listing can do nothing for years and then double, so we wait for the turn.

When you’re in cash, where is it and what does it earn?

I use AAA, which is yielding about 4.92% net of fees. Cash ETFs like this rise through the month and drop back when they pay the monthly distribution, so the value is retained. Cash won’t make or break us. The real opportunity is getting back in when the time is right.

How has the model portfolio done over the past year?

It’s been a real challenge. After strong outperformance last year, we’ve given back gains this year and are slightly behind the market while 100% in cash. Over the long term we target about 10% a year from satellites and 8% from the core. When markets run, satellites add value; when they’re tough, you tread water. Past performance isn’t a reliable guide to the future.

Why do you watch US regional banks?

They’re a bellwether for Main Street and small business in the US, which you don’t see in the big indexes. Right now they’re in a big weekly base with money flowing in, which is a good sign. They’re part of our secondary US risk-on, risk-off gauge, alongside high beta, volatility, small caps, momentum, IPOs and meme stocks. Our Market Health-O-Meter tracks 17 broad markets.

Thoughts on the ASX 200?

It’s starting to look exciting. The FTSE was a lead indicator and is very strong. What I like is that the money is moving beyond the financials, where investors have been hiding, into OZXX, ATEC and resources. The bounce is a little V-shaped and needs more time, but the market rose about 2.5% while the Nasdaq fell.

Which core ETF do you use?

We don’t run a live core for subscribers, only the satellite portfolio. Personally I’d use 100% growth: DHHF or VDAL, or GHHF if you’re younger and comfortable with gearing (about 30–40% leverage). I’m not drawing a pension, so I don’t want fixed interest.

The market liked the US election result. Melbourne Cup hangover tomorrow?

We’re already seeing the Nasdaq futures fall and Japan and Taiwan selling off, so there’s clear rotation out of tech, which isn’t a bad thing. With the midterm uncertainty over, investors will decide where to allocate, and I don’t think it will be AI and semiconductors. Resources were punished this year: ACDC is off about 45%. I expect gridlock in Washington and possibly restrictions on AI and data centres.

Any ETFs for a recession in 2027?

There isn’t a clear recession ETF. In general you avoid consumer discretionary, and in Australia possibly the banks. Resources and gold could hold up if inflation stays high. Global high-dividend ETFs like INCM and global value like VVLU are near highs, which suggests the market is already positioning defensively. I prefer global dividends to Australian ones because of the bank concentration.

If you were in pension phase, which core would you use?

You only need one diversified ETF; VDGR alone holds about 16,000 securities. I wouldn’t go lower than VDGR, so VDGR, VDHG, VDAL or DHHF, plus a cash buffer of up to three years of pension payments in AAA or term deposits. If you need $50,000 a year, that’s about $100,000–$150,000 in cash. Our Retirement & SMSF section on the website covers how much you need and how to build the portfolio.

GDX and SLVM? And WIRE?

I lean towards MNRS because it’s hedged and removes the currency. GDX could set up late this year or early next. WIRE is in a base that has held support three times and can move quickly, but it’s under its moving averages. Silver miners need more time. The best-looking commodity is zinc, but there’s no pure zinc ETF.

Ten, five or two years from retirement, should I move away from core and satellite?

I’d still use core and satellite. The satellite covers what the core misses (gold, Bitcoin, hard assets) and gives you feedback on the market. Going to 100% cash in the satellite told us to watch the core closely. As you near retirement, build a cash buffer and perhaps move from something like 60/40 core/satellite to 80/20.

I hold NDQ, QAU, IVV, DRGN, VEQ, ETPMAG and WIRE. Worried about overlap. Should I stick with it?

Run it through the overlap calculator and free portfolio report on the website. More important is timing: don’t hold ETFs in downtrends. DRGN is a classic example: we bought it, cut it when it couldn’t hold its 200-day average, and it has since fallen about 33–37%. WIRE is in a base; if it breaks the low, look out below.

Was today a change of character, or do we need more confirmation? Would you edge into satellites?

It was a positive day for Australia versus the US, but we need more data. The moves are V-shaped. Nothing stands out as a buy apart from INCM and value, which I’ll review over the weekend. Buying extended things hasn’t been rewarded this year: HACK and FUEL got hit. DRUG is up four weeks straight and would sell off quickly if money moves into resources.

Copper was down but the miners bounced. Thoughts?

Copper is only about 5.7% from its all-time high, while WIRE is about 27% below its high, so there’s a big disconnect. A lower oil price, and any resolution to the Iran conflict, would help the miners because they use a lot of energy.

How far would WIRE need to fall to be in a downtrend?

Not far. Once it breaks the bottom of its base, around $19.80–$20, it’s in a downtrend and could fall much further. ACDC shows how quickly that can happen. Selling when it broke would have saved about 35%, and a 35% loss needs a gain of more than 50% to get back.

Thoughts on India and Latin America?

I don’t like them right now. India (the Nifty 50) is in a big base after leading out of COVID and could sit there for years; mid next year is the best case. We can’t easily buy Latin America in Australia, and Brazil (EWZ) is a no-go. Chile and Peru are really copper plays, so I’d rather play the copper theme.

What are the benefits of a geared ETF like GHHF versus DHHF?

If markets rise over time, a little leverage increases returns. Since GHHF listed around April 2024, it’s up close to 50% against about 35% for DHHF. But gearing is a double-edged sword: in corrections like the tariff sell-off it falls further. I wouldn’t use it five years from retirement, but with 20 years or more it’s worth considering.

Is the Canadian market a better proxy for the ASX than the FTSE?

No. Canada has been flying, up about 54% since the tariff correction, helped by oil and its proximity to the US. I wish our market had done that, but our index has been in a long base.

Will the US be the dominant market for the next 20 years?

I think China will be, from perhaps 2030–2035, with its energy, engineering and manufacturing. But it’s not looking like it yet. The US will be hard to dethrone: it’s a deep, liquid market that lists many of the world’s best companies, and the Nasdaq is moving towards 24-hour trading.

QPON and FLOT?

Both are floating-rate bond ETFs, mostly bank debt, so their income rises with interest rates. QPON is yielding about 5.6% and FLOT about 4.6%, with a bit more offshore exposure. They’re among the better places in fixed interest, but you’re exposed to Australian banks, so I wouldn’t put all my money in them.

With rates rising, wouldn’t it be better to keep money in the offset than in ETFs?

As rates rise the offset gets more attractive, and you avoid the tax drag of investing. With a big loan, I’d put most spare cash into the mortgage, then split once it’s manageable, for example $900 a week to the loan and $100 to ETFs. See our recent video and blog post on offset vs ETFs.

Is buying a geared ETF any different from a normal ETF?

No. GHHF does the gearing internally; you just buy it on the ASX like DHHF. The difference is what you hold: the same diversified mix plus about 30–40% leverage.

DGSM or QSML for global small caps?

DGSM (Dimensional global small companies) looks better on the chart, but both are worth watching, along with US small caps. Remember global small-cap ETFs are still about 80% US. Small caps have less tech, so they could benefit from rotation. We’ll see what sets up.

I’m down 50% on ASIA. Hold on or sell?

It moved into a downtrend today, which answers it. It’s broken its previous low and its 200-day average; I’d put a line in the sand around $17.29. ASIA is really a Taiwan and Korea semiconductor trade, and tech looks on the nose. It will come good in due course, but I don’t want to sit there while it trends down.

Are emerging markets or Europe better than going all in on the US?

I don’t like Europe because money is leaving it, as the weak euro shows. Emerging markets are a broad term: the last move was really South Korea, so you were better owning Korea. If emerging markets rally next, it will likely be resources, so I’d rather buy resources directly.

Can you be over-diversified? Buffett only holds about 20 stocks.

The diversified core’s job is to be set-and-forget and hit its return target, which it does. Direct shares in Australia are harder now: liquidity has dropped and there are fewer quality companies. In DHHF, most of your money still sits in the top 10–20 holdings; $100,000 puts about $4,000 in BHP and about $189 in Qantas. Use one diversified ETF for the core and 6–10 ETFs as satellites.

Why has DRUG done so well recently?

Investors went defensive. CSL had been smashed, then reported well and crept up, and healthcare is up strongly from its lows. I’m not chasing it: four weeks straight up is very V-shaped, and we’ve seen moves like that in FANG, the Nasdaq and HACK pull back.

I’m looking at VGS and DTEC because AI, drones and defence can only get bigger.

Good ideas don’t always make good investments. VGS is mostly US shares and won’t move until US markets do. DTEC ran when Europe started spending on defence, but it’s now in a downtrend. Battery tech and lithium (ACDC) were last year’s obvious theme and got smashed this year. Let the charts confirm the theme: buy bases that are breaking out.

AQLT as a long-term substitute for A200?

AQLT is at all-time highs but a bit V-shaped. It mainly cuts materials and adds healthcare, but it’s still about 35% banks. MVW (equal weight) is quite different. Most investors want the A200 return, so I’d keep the Australian market inside a diversified core and use specific sector ETFs as satellites when they’re running.

What about a lost decade? My super growth option fell 45% from 2007.

I don’t think we’re heading into one. Money has to go somewhere, and it’s flowing into equities, especially the US, much as it did after the world wars. Expect serious volatility, but an ongoing bid for equities through to about 2030. I think the bubble is in government debt, not shares.

I’m going all in on VHY for my Australian exposure.

You can, but be aware of how exposed you are to the banks. We sold it from our income portfolio; Australian banks look very expensive against good global banks, and the economy and property are slowing. We’re leaning towards global income instead, even though the yield is lower.

What about CURE?

CURE is biotech and hasn’t moved as well as DRUG or IXJ. It needs more time; after its last big move it sat for about a year.

INCM?

I like it because it’s the first to break out, to a new all-time high. But it’s V-shaped, so I’m not chasing it. If it settles over the next few weeks, it will be high on the list.

AI ETFs are falling. Is it a good time to buy?

No. Semiconductors have broken their previous low and are below the 200-day average, so they’re in a downtrend. GXAI and other AI ETFs are breaking down too. They could sit there for months, so I won’t bottom-feed when there are better places for the money.

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General advice only, given live at the date shown. Questions are answered generally, without knowing your personal circumstances. ETFs and shares mentioned are not recommendations. Market views change quickly, and past performance is not a reliable indicator of future performance.