Pandemic Wave + Election Uncertainties + Growth/Value Rotation = Volatility
Local market was positive on global currency trade despite negative lead from the US. Weak USD kept AUDUSD rising through the day and the global investors were buying the value trade in banks for the currency exposure. The banks added about 70% of the index performance of the day. Locally SA is getting hit by pandemic waves as VIC recovers. Australian government seems to keep going back to property bubble pumping while RBA is in denial as wages growth hits all-time lows. The main catalysts remain with US as pandemic wave, election uncertainties and stimulus disagreements. Vaccine upside was overly optimistic as more data still to come while time lag is between 6 to 12months away. We are seeing Governors in the US moving to put in early steps of restrictions as cases and hospitalization hits record levels. Even ECB has said their forecasts are not changed by vaccine hope. Trump administration continues to ramp up election uncertainties while collecting donations for legal fights that they are dropping in major states. The latest is the head of cybersecurity was fired after he did not back the White House view that election was stolen.
Overnight US market was negative all day but improved from the opening falls to be less negative and aimless most of the day. Bonds and Russell were up while all other indices, metals and USD were down. Amazon moving into online pharmacy and Spanish bank selling out of their US operations were corporate news while US Fed wants more fiscal stimulus and Senate is far from what Congress wants. Markets are moving from vaccine hope to lockdown restrictions as Covid spreads like wildfire. ECB said vaccine doesn’t change any of their forecasts…If you had to, then there is an issue in your strategy as it was common knowledge that about the top dozen vaccine candidates were expected to give early results. CDC was flagging about 3-4 will be good results. Energy and Property were the only positive sectors. Growth to value switch is playing out...it starts nice and orderly before it goes nasty!!!
Remain nimble, contrarian and cautiously pragmatic with elevated global macro risks!!! Buckle up...it’s going to get bumpy!!!
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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...