The S&P/ASX 200 Index (ASX: XJO) is up 0.67% today but remains down 5.3% over the year to date.
That's better than where it was in mid-June — down 15% — when the market appeared to turn.
So, where to from here? Are we at, or close to, the bottom for ASX 200 shares?
Are ASX 200 shares close to the bottom?
According to The Australian, top broker Macquarie thinks the bottom is at least six months away.
Macquarie's Matthew Brooks says ASX shares are more likely near the end of a bear market rally. That's very different to being at the start of a bull market rally.
Standing in the way of an ASX 200 shares comeback is a forecasted United States recession in 2023.
Brooks said:
We may emerge from the shadow of a boom in 2023 but a lot of water needs to flow under the
bridge before then — our best guess is a market bottom around July 2023.
To this end, the broker has kicked a bunch of high-profile ASX 200 shares out of its model portfolios.
Which ASX 200 shares is Macquarie dumping?
Brokers publish model portfolios to help their clients keep their ASX shares portfolios up-to-date and growing.
However, changes to the model portfolios do not indicate an official buy, sell or hold recommendation.
The companies kicked out of Macquarie's model portfolios include ASX travel shares Flight Centre Travel Group Ltd (ASX: FLT) and Qantas Airways Limited (ASX: QAN).
Also dismissed: Australia and New Zealand Banking Group Ltd (ASX: ANZ), Tabcorp Holdings Ltd (ASX: TAH), South32 Ltd (ASX: S32), James Hardie Industries plc (ASX: JHX), and Seven Group Holdings Ltd (ASX: SVW).
Macquarie has also reduced its model portfolio holdings in Suncorp Group Ltd (ASX: SUN), National Australia Bank Ltd (ASX: NAB), Insurance Australia Group Ltd (ASX: IAG), BHP Group Ltd (ASX: BHP), Woodside Energy Group Ltd (ASX: WDS), Pilbara Minerals Ltd (ASX: PLS) and Computershare Limited (ASX: CPU).
Which ASX 200 shares is Macquarie backing?
On the other side of the coin, the ASX 200 shares Macquarie is adding to its model portfolios are Commonwealth Bank of Australia (ASX: CBA), Transurban Group (ASX: TCL), APA Group (ASX: APA), Orora Ltd (ASX: ORA), and ASX Ltd (ASX: ASX).
The broker has also increased its holdings in CSL Limited (ASX: CSL) and Ramsay Health Care Limited (ASX: RHC).
Brooks explains:
The portfolio changes we have made are done to reduce exposure to earnings risks, while still trying to minimise exposure to highly valued stocks.
We also reduce exposure to stocks that benefit from higher bond yields and rotate to 'bond proxies'. Our changes are also informed by what worked in past recessions.
What happens in America follows in Australia
The Australian Financial Review (AFR) reports that two other brokers think the key to a market pivot for the S&P 500 Index (SP: .INX) lies in the US Federal Reserve ceasing its interest rate rises.
These comments are relevant to ASX 200 shares because the Australian stock market tends to follow US market trends.
LPL Financial's Adam Turnquist and Marc Zabicki said:
If you factor in the fed funds futures timeline of a May or June peak in the terminal rate, you could see around an 11 per cent second half rally on the S&P 500 (based on six-month average returns).
Will growth stage a comeback? History shows growth and value trading higher but largely in line during the six-month period after a Fed pivot.
However … growth outperformance typically becomes more pronounced after the six-month post-pivot window. One of the catalysts driving growth's relative strength likely stems from falling interest rates and inflation during this period.
With a potential peak in interest rates occurring near a Fed pivot, we suspect growth could make a comeback during the back half of 2023.
Mike Wilson, a US equity strategist at Morgan Stanley, said his team expects the S&P 500 to continue rallying for a short while.
Wilson said:
We still expect higher highs for this tactical rally before the deteriorating fundamentals take us to lower bear market lows next year.
