Christmas hangover or bad pandemic management...may be both!

Local market had a low turnover negative day in holiday period while quarter/year end window dressing helped to reduce the falls in the last hour. It’s a short week with only a shortened day left to trade with most local fund managers on holiday. Expect month/quarter/year end macro asset allocation trades to start taking over global markets. US markets have a senate runoff election early next week that will have big implications going forwards. If Democrats win both seats, they will control all three layers of government and will drive a lot of changes. If they don’t, Republicans will try to block just about everything and that means new stimulus plans will be hard to pass. Valuations are high, central banks are losing control, debt pile is historical and new pandemic waves are breaking hospitalization capacity. We may be looking at another volatile start to the new year! Fund managers are likely to get defensive through the start of the new year while the macro sorts itself out.

Pandemic waves are hitting all parts of the world. US remains a mess while vaccine rollout is “warp dead speed”. UK is a full blown pandemic mess. You know it’s bad when Brexit becomes irrelevant. EU nations are flipping between lockdown and new virus version mess. Asia Ex China is putting up big daily cases and lockdown looks inevitable. South America and Africa remains Covid strongholds. Developed Markets are looking at 2021Q2/Q3 for vaccine coverage while Emerging Markets are 2021Q4 to 2022Q1 story. Unlike money printing wage subsidies in the Developed Markets, Emerging Markets are mainly debt fuelled consumers on the bring of unravelling. New waves of pandemic and new variants may be one too many hits to take.

Locally we are seeing a new wave in NSW. Instead of locking down and controlling the spread, vested interest groups have pushed the NSW government into the most illogical complicated mess of a strategy that prioritizes fireworks and cricket over health and safety. Given the spread of cases in NSW, how are we not mandating masks and moving to lockdown restrictions? This is taking delusion to another level. The NSW map shows the government has lost control.

Overnight US market started positive and then slid into negative as pandemic and economic woes starting to weigh on recovery optimism. New data out of Europe showing that new variant is more deadly and faster spreading. EU to extend lockdowns into Jan. Bonds mainly flat and gold ticked higher while USD and copper were lower. Russell was bashed on economic woes with energy and property the weakest sectors. Vaccine rollout is running into logistics problems around the world. The recent political play with stimulus bill shows new stimulus without senate control by Democrats will be very hard while higher tax risk is almost inevitable.

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

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