The ASX appears to have turned its dismal performance in recent days around, gaining a modest 0.30% or 21.30 points today to net a 0.59% increase over the last five days, finishing trading at 7,160.20.
Miners, particularly lithium miners, took the spotlight, surging on an 8% uptick to the lithium price on the Shanghai Metals Market which brought the mineral – which some call ‘white gold’ – to US$272,476 per tonne.
Sentiment in the US has been strong for lithium, especially since an interest rate hike pause is becoming more likely as the Fed digests lower-than-expected CPI data.
Unsurprising, then, that two lithium mining companies gained the most today.
Mineral Resources Ltd (ASX:MIN), a lithium, iron ore and energy company, gained 5.55% today, while Allkem Limited, another lithium miner, added 4.82% to its stock price
The ASX sectors were subdued, with only Materials (+2.42%) and Health Care (-4.79%) making significant moves in either direction.
Commodities were a little livelier, with small gains to base metals and oil, but dips in precious metals.
Nickel gained 3.30%, copper 1.69% and West Texas Crude 2.88% while silver shed 2.18% and platinum dipped 1.49%.
Diversification most profitable long-term strategy
New research compiled by Capital.com has confirmed the commonly lauded strategy of investment diversification as the most profitable approach to trading, highlighting the importance of trading diversified asset classes.
An analysis of 100,000 active traders between May 2022 and April 2023 revealed clients who traded across five different asset classes typically closed 60% of their positions with a profit, compared to 48% who traded in one asset class.
Despite the difference in average outcome, Capital.com says only about 15% of its clients trade across five asset classes, with the majority trading between two and four, and some 20% trading only a single class.
“It’s better to spread the risk across different asset classes, companies and investments than to pursue profits from one single area that could quickly go south,” Capital.com senior market analyst Daniela Hathorn said.
“Our data clearly demonstrates how diversification can not only be an effective risk management strategy but also a profitable trading strategy during periods of market uncertainty.”
Interestingly, first-time traders and newer clients appear to have the most success when trading commodities, foreign exchange and indices, and were less profitable when trading equities.
On average, clients who began trading for the first time with equities realised a profit in 46% of their positions.
In contrast, clients who began trading with commodities realised a profit from 58% of their positions, followed by FX, with traders closing 56% of positions with profits, and indices, where 54% closed their positions with profits, on average.
“With rising interest rates affecting the cost of borrowing and future corporate growth, company earnings have been a mixed bag,” noted Hathorn.
“Over the same period, however, commodity markets have shown resilience with oil and gas markets benefiting from rising prices while gold has remained the safe-haven asset during a period of heightened uncertainty.
“Across FX, ongoing global central bank activity provided ample opportunities for traders looking to capital on macro events.”
With global markets and economies still in disarray as central banks and governments scramble to control inflation, said opportunities are likely to be plentiful.
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