Sunset Strip - 13th October 2020
Local market started positive on US lead and mainly stayed there with no real sentiment. The turnover through the day suggests it was mainly global investors and nothing much from local fundies. NASDAQ was up over 2% on nothing…literally nothing new happened in the last 24 hours to get that reaction from the current stretched levels. Momentum is a beautiful dream and it usually ends as a nightmare when fundamentals are not supporting it. Globally markets are getting comfortable with Democrats leading the election but ignoring the higher corporate taxes and higher regulations. Investors are ignoring pandemic restrictions in UK and France while US covid numbers are scaring CDC. Markets are pricing in stimulus upside despite endless chatter and no deal has been the result. Investors are positive till they are not!!!
Large caps (i.e. banks) drove the market higher today while materials were the only negative sector. US futures are slightly negative. October is the most volatile month and this one hasn’t disappointed. Just feels like this volatility is just starting!!!
US market had a positive day overnight with NASDAQ leading the run with no obvious catalyst except momentum into reporting season. Reporting season should be positive due to very weak expectations but multiples are so high...that is mainly in the price. Investors are jumping into tech for growth and banks for value.... and that makes sense. But the rest should be volatile at best. Columbus Day federal holiday meant less action and very little move in bonds, currency or commodities. Trump is cleared of infection and so he is holding court in the biggest Covid risk destination of Florida. Markets are pricing in clear Democrat win but ignoring higher corporate tax and Trump challenges. The usual cycle is market underperform into election and runs after but it hasn’t underperformed...so it may not outperform after. The latest media articles point to China telling coal users to stay away from Aussie coal completely. We may see more geopolitics as US election rolls up.
Remain nimble, contrarian and cautiously pragmatic with elevated global macro risks!!! Buckle up...it’s going to get bumpy…new month/quarter has started!!!
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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...