Sunset Strip 03rd September 2020
Local market started positive on global lead and mainly held despite AUDUSD faded on collapse of the local trade data. Global investors were ignoring the fading local currency on the view that USD decline cycle will override local mess.
RBA had to finally accept the currency problem, but they can’t do much as they already wasted all the rate cuts. Government keeps fighting with different state governments as distraction while only policy work seems to be repeating tax cuts that delivered no growth and more inequality.
If anything, the pandemic has clearly showed that low income people need to keep working and consuming for the economies around the world to keep growing. But for some reason the policy work is always cutting from the low income and giving more to the top income to repeat the failed “trickle down economics”. Despite governments in the west blaming the pandemic, all the economies were headed to recession in 2019 as each of their central banks were in a race to zero rates. Expect more economic cracks to appear gradually!!!
US market ran up overnight on defensives as yields fell after weekly jobs data and ADP missed by almost 50%. Defensive sectors like Utilities and Health Care were big movers while Tech was a weak mover as hot stocks like Tesla were seeing major shareholders getting out. Only US sector down was energy despite US stockpile declining and supply issues. Bonds and US$ higher while commodities lower overnight. Weird times in the market when it goes up on good and bad news.
CDC and US Fed are too aligned to election cycle. Expect a unproven vaccine to get emergency approval in late Oct ahead of election and US Fed to burn more balance after next week’s update. US going into a Labour day long weekend and usually most will take off early on Friday to make it 4 day weekend. Plenty of road trips will be in play in the US as summer break gets people moving. Number of EU nations are back at peak virus cases while half of US has cases rising.
Remain nimble, contrarian and cautiously
pragmatic with elevated global macro risks!!!
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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...