Sunset Strip - 15th October 2020
Local market had a positive day against weak global markets with Resources and Banks moving higher while Tech was weak. It was that time of the month when options expiry boosted turnover but still wasn’t anything special. Aussie Job data showed that we have started to lose jobs even before the high level of JobKeeper was reduced. RBA is talking rate cuts and QE. RBA is starting to sound like a primary school teacher. The scare story works the first few times till the kids call out the bluff. RBA cutting rates from 25 bps or issues longer dated bonds or adding more QE is candle in the global macro wind. It is clear bet for rising AUD and falling USD. Big Buff was buying the weak USD trade by investing into Japan for rising Yen trade. Now the Chinese are joining that trade by substantially increasing their Yen bonds. Today our China/Commodity linked market was up against weak EU, US and Asian markets. The optimism for US stimulus is mostly off the table while Covid pandemic has new waves in EU and US. Beware markets running on leveraged optimistic momentum when fundamentals are not backing it!!!
US market started positive overnight and then fell in the first two hours as talk from White House was pure spin regarding stimulus or pandemic. NASDAQ lead the slide with DOW sliding the least. Bonds were higher, US$ lower and commodities better. Stimulus deal does not look possible pre-election while post-election likely to be weak under republicans than democrats. Pandemic growing again in US and EU...out of control in Asia and South America. Even Germany is struggling with new waves. Gold was the big outperforming sector while Financials and Retail were the worst. Reporting season keeps beating low expectations, but market has already priced that in. US financials deliver messy outlook despite the stimulus!!!
Remain nimble, contrarian and cautiously pragmatic with elevated global macro risks!!! Buckle up...it’s going to get bumpy…new month/quarter has started!!!
Market bounce adding pressure to already stretched multiples!!!
pdf attached
SunsetStrip20201015.pdf
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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...
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