Sunset Strip - 21st October 2020

Mathan Somasundaram

Deep Data Analytics

Local market was volatile but mainly flat. It struggled to follow the US bounce on stimulus hope despite the recovery in the currency. Global investors were spooked by weak job data yesterday and weak retail sales today while RBA is in line to cut rates down to 10-15 bps. The central banks around the world are fast running out of ideas and preparing to take rates to negative territory and unleash digital currency to directly stimulate the economy. Due to government and banking system problems/rorts/corruptions, the monetary policy has not solved the problem and fiscal policy is loaded with too much debt. Central Banks are going to bypass governments and banks to boost economy by direct income. Socialism may be coming sooner than most anticipate but it will be packaged as enhanced capitalism. Bit like the Coalition government running Labor policies after spending a decade bashing them for supposedly badly managing a GFC with no recession!!!

As we mentioned before, we are all following the failed model of Japan and inevitably this will create a lot of unforeseen problems. The first of that is inflation!!! Not the good inflation through wage growth but bad inflation through cost rises. Depending on what happens in the US election and the policy options taken after that, we may see the ugly head of cost inflation within months!!! White House wants a stimulus deal to boost a fading election cycle while Democrats are stalling and Republicans are scared of the mess after the election. US presidential debate tomorrow night will be another risk catalyst!!!

The Chinese Yuan is ripping higher to more than two year high against USD as Chinese economy is the only major country/region that has stable recovery while managing pandemic waves. Trade wars were supposedly easy to win and make America great again. Guess that hasn’t gone to plan according to the currency markets!!!

Overnight US market started up 350 on better stimulus sentiment but that faded though the second half of the day to finish up only 110. All the US indices were up around 0.4% while NASDAQ was the laggard up 0.3%. Bonds and US$ lower while Commodities were up... including Gold. Despite these moves and better Covid outlook, A$US$ went down...fiscal and monetary policy starting to worry investors. EU markets were lower. Pandemic waves are ripping through EU and US. We are seeing rolling restrictions coming into EU and probably see that in US after election due to politics. Next month could be key as numbers are on the run. Democrats are playing with Republicans on stimulus. They are not going to say no and they know Republicans won’t agree to $2trill+ package. They are going to keep this drama going as close as they can to the election without a deal while negotiating. Republicans seems to not have a plan B as far as policy reform limited to tax cuts and handouts. Energy was the best sector while Staples were the worst. October is living up to the volatility tag and we just hit third week. Presidential debate tomorrow night should add to the risk as markets are mainly pricing in one sided election result for democrats.

Remain nimble, contrarian and cautiously pragmatic with elevated global macro risks!!! Buckle’s going to get bumpy!!!

US heading to socialism sooner than you think while Japan and Europe are already there but in denial.

Not already a Livewire member?

Sign up today to get free access to investment ideas and strategies from Australia’s leading investors.

Deep Data Analytics provides this financial advice as an honest and reasonable opinion held at a point in time about an investment’s risk profile and merit and the information is provided by the Deep Data Analytics in good faith. The views of the adviser(s) do not necessarily reflect the views of the AFS Licensee. Deep Data Analytics has no obligation to update the opinion unless Deep Data Analytics is currently contracted to provide such an updated opinion. Deep Data Analytics does not warrant the accuracy of any information it sources from others. All statements as to future matters are not guaranteed to be accurate and any statements as to past performance do not represent future performance. Assessment of risk can be subjective. Portfolios of equity investments need to be well diversified and the risk appropriate for the investor. Equity investments in listed or unlisted companies yet to achieve a profit or with an equity value less than $50 million should collectively be a small component of a balanced portfolio, with smaller individual investment sizes than otherwise. Investors are responsible for their own investment decisions, unless a contract stipulates otherwise. Deep Data Analytics does not stand behind the capital value or performance of any investment. Subject to any terms implied by law and which cannot be excluded, Deep Data Analytics shall not be liable for any errors, omissions, defects or misrepresentations in the information (including by reasons of negligence, negligent misstatement or otherwise) or for any loss or damage (whether direct or indirect) suffered by persons who use or rely on the information. If any law prohibits the exclusion of such liability, Deep Data Analytics limits its liability to the re-supply of the Information, provided that such limitation is permitted by law and is fair and reasonable. Copyright © Deep Data Analytics. All rights reserved. This material is proprietary to Deep Data Analytics and may not be disclosed to third parties. Any unauthorized use, duplication or disclosure of this document is prohibited. The content has been approved for distribution by Deep Data Analytics (ABN 67 159 532 213 AFS Representative No. 1282992) which is a corporate approved representative of BR Securities (ABN 92 168 734 530 and holder of AFSL No. 456663). Deep Data Analytics is the business name of ABN 67 159 532 213.

1 topic

Mathan Somasundaram
Founder & CEO
Deep Data Analytics

Over 30 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...

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.


Sign In or Join Free to comment