Bears are seeing cracks in the central bank protection strategy

Mathan Somasundaram

Deep Data Analytics

Local market had a positive day but the momentum seems to be running out of gas from the global asset allocation trade. The key positives for the market remain with the stimulus upside from weak economic recovery. Election uncertainty and Covid pandemic are the overhang on the global economy struggling to recover from the recession damage. Macro trade back into equities and bonds seems to be fading while BOE adding QE and ECB / US Fed are talking positive on stimulus. The relative calmness in the bond market over the last 24 hours suggests we may be at the back end of the macro asset allocation trade. Pandemic cases are rising fast in EU and US while geopolitics between China and Australia has reached danger territory!!!

US election is in the late cycle as fraud calls and legal challenges are flying thick and fast as the numbers get tight. The latest election update shows that Democrats are likely to flip the White House than Republicans holding it. Senate looks safe for Republicans but nothing is certain. Numbers are moving around due to historical high voting turnout and historical high pre/postal voting. We should have enough data in key states to put one side over the line on the weekend. Elevated risk of market and social volatility due to the polarized state of US!!!

Overnight the US market had another solid positive day while bonds took a break. Election uncertainty and social unrest remains elevated while we may get clarity on the numbers later today...pre legal challenges!!! BOE added more QE while US Fed and ECB were flagging more needs to be done. Looks like everyone waiting for the election mess to clear before acting... unlike wasted RBA cuts that just boosted bank profits. USD and Oil fell again while Gold running up again. AUDUSD moved closer to 73 cents. All sectors in the green except Energy with Gold ripping higher. There is a lot of water to go under the election bridge before it settles...even if the numbers give a guide today!!!

Remain nimble, contrarian and cautiously pragmatic with elevated global macro risks!!! Buckle’s going to get bumpy!!!

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Mathan Somasundaram
Founder & CEO
Deep Data Analytics

Over 25 years’ experience in the finance/tech industry. Mathan has worked extensively in all parts of the finance sector (i.e. County NatWest, Citi, LIM, Southern Cross, Bell Potter, Baillieu Holst and Blue Ocean Equities). Currently Founder and...

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