Sunset Strip - 02nd October 2020

Local market was trading down with currency most of the morning before an active buy portfolio stepped up at lunch to boost the market…but news of US president and first lady being infected by Covid-19 tanked the market and the currency in the last hour. US futures are down 1.5-2.0% while US bond yields are down 2bps. Aussie bond yields are down 6bps. Spot Gold moved from being down US$10 to up US$10. US$ has bounced on risk off and pushed other currencies lower.

The uncertainty level will pop given the proximity of the US election and quarantine period of two weeks in an environment where the sitting president is behind on the polls after the worst debate in history. Don’t discount the fact that this was all a distraction play from the reality star to change the momentum and walk out and claim it was nothing in a week!!!

It is ironical that the two main vocal west leaders (i.e. US and UK) that played down the pandemic have now been struck down by it. There is a certain level of Karma that is quite scary. UK prime minister was hit hard and let’s hope that doesn’t play out for US president. There will be claims that the test was rigged, he was targeted etc but reality is US has the highest infection and deaths for any developed country by most measures and this risk was high when you have election gatherings with no social distancing.

China has started their week long “Golden Week” holiday period and NSW has a long weekend with Monday off. Australia has School holidays through next week.

US market had another volatile day overnight that finished positive for NASDAQ and Russell while flat for DOW and slightly positive for S&P. DOW started more than 200 up on fake claims about stimulus deal and that faded through the day as the reality of more talk with no deal emerges. Expect last minute executive action to send cheque to voters that will be challenged as the election gets closer. Non farm payrolls tonight is another marker to check the health of the economy that is fading. Nearly 12m unemployed now when 8m was the worst in the GFC cycle. Value stocks in Russell and WFH in NASDAQ were preferred. Energy and Health Care were the worst sectors while Property and Retail were the best. Bonds flat, commodities lower, Gold higher and US$ lower. Trump doesn’t want to change the debate rules as he sees that he won while most disagree on all fronts after the worst debate in history. Vaccine hope gradually being pushed into 2021. China remains the best risk/return option for exposure.

Remain nimble, contrarian and cautiously pragmatic with elevated global macro risks!!! Buckle up...it’s going to get bumpy…new month/quarter has started!!!