Momo investors don't like rising yields

Local market had a flat day with mining doing the heavy lifting on China data while weak US data keeps piling up. US markets finished positive on stimulus and vaccine but the senate republicans rained on the stimulus deal straight after their market close. Vaccine hope is still medium term catalyst for the economy while short term economic slowdown was further confirmed with manufacturing and auto sales data. Pandemic outlook in the US suggests there are restrictions coming sooner than later. Media speculation is just about everyone in the White House is boking in a presidential pardon. Supposedly there is so much of that going one…there is even reports of pardon for donation being investigated. Nothing that happens in the White House can surprise anyone anymore!

RBA started their update with…we don’t target property market and then just about everything had a link to the property market. Australia has two growth engines…commodity bubble or property bubble. Fighting with China creates uncertainty for commodities and further forces the risk in property bubble. Every so called reform and handout is targeting property bubble. Almost 60-70% of fund managers chase direct or indirect property bubble exposure and government handouts. Small business is the biggest employer and they have not paid rent, utilities or wages…and that is about to change. Government basically paid workers wages to classify them as employed while being unemployed. Just imagine the amount of money being pumped to keep the property bubble afloat in rising unemployment, falling migration, falling rents and oversupplied apartments. Someone will be paying taxes for decades to unwind this mess!

US 10 year bond yield is breaking higher again and forming the Golden Cross pattern with 50 day and 100 day MA breaking above 200 day MA. Reflation trade is building momentum. Growth multiples are going to come lower and value stocks will continue to catch a bid on cyclical recovery. Has the 40 year bond cycle? If not…we are falling into double dip recession in the US and that is a credible option now due to pandemic management.

US market had a positive day on the back of stimulus and vaccine hope over Covid pandemic and economic issues. Bipartisan group has put together a stimulus bill around $1t and it's already getting hit my Senate Republicans. Deal looks to be on the slow path as both sides are more than $1t away from each other. Vaccine hope is pricing in perfect execution in production and distribution in a unproven tech and logistics level. Doctors are worried about decent side effects on 10-15% may keep them from coming for their second shot...ignoring the 20-30% on political reasons. Covid is rampant and economic data has started to fade. Bonds, USD and Oil fell. Gold, Copper and yields moving up. NASDAQ was the best and DOW was the laggard. Gold and Banks were the best sectors while Industrials were the only red sector. Yields are too high again and growth stock multiples can't hold. Do you have enough Gold? Never enough in this market.

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

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