Local market had a low turnover flat day on the back of rising AUDUSD despite potential lockdown restrictions rising around the world and US senate runoff election risk. USD continues to slide and that jammed up the AUDUSD and Gold. Global investors were back buying our market…mainly miners…after the initial flop. The market was down ex miners with commodities the main bright spot for the day. UK is in lockdown while Germany leads multiple EU nations falling into lockdown or extending lockdown. US election debacle continues with Georgia runoff elections today and congress certifying result tomorrow. Market has priced in that Republicans will hold the senate despite recent efforts by Trump to derail the support. Risk remains that Democrats win at long odds. It is always a worry when markets are pricing certainty on an uncertain event. Global fund managers are under pressure with market and currency risk in the most crowded trade of being long US equities. The financial stress is negative and option market optimism is fading. EU is about to deliver downgrades on lockdown and China is tightening their belt after stimulus binge. If everyone wants to get out at the same time, it can get very messy very quickly!

US equity markets are priced like a high yielding junk bond due to US government and US Fed endless stimulus plans without reform. The economy had recession driving structural issues before the pandemic and they are still unabated. US Fed is sitting on historical high balance sheet expansion and US government is facing historical high debt while the economy remain weak as recovery fades. Equity markets are caught between money printing and the reflation that it delivers. Economic recovery has been purely asset price driven that that only favors a minority while the majority are languishing in recession. Expect US Fed to resort to more money printing while new administration will try to expand handouts. History suggests equity markets priced like junk bonds end very badly!

US Market last close > US market closed down 380 after being down nearly double that intraday. S&P and NASDAQ lead the falls. Oil was hit as OPEC remains a mess as lockdown drives demand risk. UK goes into another lockdown while Germany and other EU countries are likely to extend theirs. New UK variant hits NY. Japan in lockdown risk. China is starting curb things as global recovery fades. Bonds and USD ticked lower while Gold is flying. Gold was the best sector by a country mile while property and utilities were the worst hit. Senate runoff is the next uncertainty in the US soap opera. Markets have everything going right and central banks solving it all. The risk is that something goes wrong.

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

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