Pandemic and Election risks are going to bring the Halloween party to the markets

Mathan Somasundaram

Deep Data Analytics

Local market had a volatile positive day due to the global investors chasing currency after the positive China manufacturing data. Despite the negative global lead from Friday night, China data drove global investors to buy into Asian markets as pandemic waves and election uncertainties weigh on Europe and US. The main overhang remains the US election while the pandemic waves are gradually pushing the global economies into another phase of lockdown restriction and corporate earnings downgrades. The risk weighted outlook suggests US election is likely to be close in the first few days before one side runs away with it. Given the polarization of US politics, it will be easy to drive up civil unrest during the uncertainty. Similar to what happened in February, markets are starting to accept lockdown restrictions and corporate earnings downgrade. What if there is no vaccine and this restriction cycles are the way forwards in 2021? Investors are overly optimistic on vaccine like global growth!!!

Central Banks will inevitably print more cheap debt in order to hold the ponzi scheme together and make the problem deeper and harder to solve. Fiscal miss management in most parts of the world over a number of years have left structural problems that can only solved by reform but in most cases vested interest groups have turned the problems in ideological argument instead of economic reality. History shows economies do not reform unless recession cycle cleans out the dead wood. The global recession realities are going to remove the dead wood as cost inflation starts to filter through the economies!!! RBA went off the rails in 2016 rate cuts and now they are becoming the problem than the solution. Like what happened in Japan after WW2, RBA is going to dig a bigger and deeper economic hole due to fiscal policy failures!!!

Overnight the US market finished down 150 despite 300 point pump in the last hour for month end window dressing. NASDAQ was the worst hit -2.5% compared to DOW -0.6%, Russell was -1.5% and S&P500 -1.2%. Growth stocks were seeing some pain after big tech results were beats but not in the ballpark for sky high valuations. EU lockdown restrictions are spreading while herd immunity has been proven invalid by Sweden as well the large scale testing proved immunity doesn’t last. Even in the US, El Paso is returning to restrictions and it looks inevitable that for more will follow after election politics gets out of the way. Bonds and most commodities are lower while Gold and US$ higher. Bond yields are pushing higher...US 30 year bond yield is 1.66%...breaking out higher with inflation outlook!!! Month end window dressing is likely to unwind as election and pandemic uncertainty rises further.

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.