Sunset Strip - 20th October 2020
Local market started negative and had a mini bounce before RBA minutes and no free kick from China sank the market with US and EU worries. RBA minutes confirmed what we already knew…rate cut coming in Nov. Bank Bill Swap Rate has already priced in the 10-15bps cut. That should help an over supplied asset investment in property with low multiplier effect and save bad property developers while stealing from hard working conservative savers and retirees. China property prices were up but not as much as expected while PBOC left rates unchanged. Vale confirmed that their Iron Ore supply is back and will compete quite well with the currency advantage of Brazil compared to Australia. Iron Ore likely to come back to near US$100 as Vale ramps up. US stimulus talk keeps going on between White House and Democrats while it needs to pass Republicans to execute. White House has given up a lot of ground but still no deal. Pandemic waves are flying through US, EU and Emerging Markets Ex China. We continue to rely on the failed Central Bank strategy of solving debt problem with more debt and then repeat and repeat and repeat etc etc etc!!! As they say…definition of insanity is doing the same thing and expecting a different outcome…explains the new world economic strategy.
The local market bulls may want to look at the latest weekly payroll data. All regions are weaker than they were in Sep as Job Keeper rolls off…same excluding VIC as well.
Overnight US market fell through the day to finish down 410. There is one day to get a stimulus deal done before election it seems and Whitehouse wants loose wording that they can change and Democrats are not playing. All the major US indices were down 1.3% to 1.7% while Energy and Tech lead all sectors into the red. Bonds and Gold ticked lower while weaker US$ pushed most commodities higher...except Oil as demand worries rise. Pandemic hitting EU and US hard while politicians continue to follow protocol for political reasons. Next few months could be very ugly. EU markets were lower on Covid wave. China data remains solid but you can’t say that about anywhere else!!!
Remain nimble, contrarian and cautiously pragmatic with elevated global macro risks!!! Buckle up...it’s going to get bumpy…new month/quarter has started!!!
Economic cycle >
Stimulus has delayed the recession but extended the pain for longer!!!
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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...