Markets are a hostage to Vaccine stories and Election tweets!!!

Mathan Somasundaram

Deep Data Analytics

Local market had a strong lead from the US but the momentum only delivered a solid positive start that faded through the day as the election uncertainties and vaccine reality weighed on weak economic outlook in the US. Markets are struggling to justify the sky high valuation with lockdown restrictions playing out around the world. Every central bank has the same play book…debase the currency, expand the balance sheet and keep the long yields down. US and Europe have created a roadblock to global recovery via pandemic waves. The cost inflation is rising in the US with currency debasement and the bond market is reacting. Central Banks are losing control of the twists and turns in order to keep yields low for longer. US 10 year bond yields are higher than Australia. Historical trend suggests market risks are high as financial stress is building. Election may have been called in the US but the transition may not happen at all. We may be going to countless legal challenges and delay tactics before this soap opera is over. If you ever been through the US legal system, you know that everything moves slower than New York traffic. While this legal song and dance are played out, there is very little hope of a stimulus deal…even a weak one!!! The vaccine updates are many and they continue to be weak on detail while delivering good share price movements. Overnight one is no different, it is not like they do not know that you need more details but they offer enough for optimism but not enough for clarity. Everyone knew that there is about a dozen potential vaccines that will get early data in Nov and so expect more to come…hopefully more details than just pump stories!!! This does not change the fact that the best case scenario for vaccine coverage of US will be in about 6 months while the world coverage is likely to be in a year. There is a substantial economic mess to clear up ahead of that. It is positive news but that will not remove the winter hit coming to northern hemisphere after the abysmal management of the pandemic by some major economies.

The equity markets have started to make major sector switches due to the bond markets running out of steam. US 10 year bond yield is breaking multi-year down trend. Investing in a rising yield cycle has only been academic for all investors up to now. Get ready…it is about to get real!!!

Overnight the US market started up 1600 on vaccine news and election being called...but the reality of the vaccine delays watered down the bounce to 830...that’s +3%. Russell up +4.3% lead the reflation bounce with NASDAQ down -1.5%. Bonds, Gold, Copper were down while US$ was up. High growth stocks with high multiples are not supported here while cyclical growth at value is back. Sector and stock selection will be key in the next year and that will continue to change. Resources and Financials to benefit over Industrials.

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

Not already a Livewire member?

Sign up today to get free access to investment ideas and strategies from Australia’s leading investors.

........
Deep Data Analytics provides this financial advice as an honest and reasonable opinion held at a point in time about an investment’s risk profile and merit and the information is provided by the Deep Data Analytics in good faith. The views of the adviser(s) do not necessarily reflect the views of the AFS Licensee. Deep Data Analytics has no obligation to update the opinion unless Deep Data Analytics is currently contracted to provide such an updated opinion. Deep Data Analytics does not warrant the accuracy of any information it sources from others. All statements as to future matters are not guaranteed to be accurate and any statements as to past performance do not represent future performance. Assessment of risk can be subjective. Portfolios of equity investments need to be well diversified and the risk appropriate for the investor. Equity investments in listed or unlisted companies yet to achieve a profit or with an equity value less than $50 million should collectively be a small component of a balanced portfolio, with smaller individual investment sizes than otherwise. Investors are responsible for their own investment decisions, unless a contract stipulates otherwise. Deep Data Analytics does not stand behind the capital value or performance of any investment. Subject to any terms implied by law and which cannot be excluded, Deep Data Analytics shall not be liable for any errors, omissions, defects or misrepresentations in the information (including by reasons of negligence, negligent misstatement or otherwise) or for any loss or damage (whether direct or indirect) suffered by persons who use or rely on the information. If any law prohibits the exclusion of such liability, Deep Data Analytics limits its liability to the re-supply of the Information, provided that such limitation is permitted by law and is fair and reasonable. Copyright © Deep Data Analytics. All rights reserved. This material is proprietary to Deep Data Analytics and may not be disclosed to third parties. Any unauthorized use, duplication or disclosure of this document is prohibited. The content has been approved for distribution by Deep Data Analytics (ABN 67 159 532 213 AFS Representative No. 1282992) which is a corporate approved representative of BR Securities (ABN 92 168 734 530 and holder of AFSL No. 456663). Deep Data Analytics is the business name of ABN 67 159 532 213.

1 topic

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...

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.