Sunset Strip - 23rd October 2020
Local market had another slight negative volatile day with big transition portfolios moving around all day. The market fell for the first few hours of the day before buying support turns up to reduce the loses into slight negative day. US election debate was the big risk factor of the day and that turned out to be a non-event. The debate wasn’t going to change people’s mind while the reality of the politics suggested Trump needed to outperform or Biden had to stuff up. Neither happened and each side will pick it to pieces and claim they won. Biden is leading in the popular vote and probably he will hold that but the main game is Senate and swing states. Biden is ahead in a couple of swing states while in the margin of error for the rest….so swing states are still too close to call for election result. Senate is the risk for Republicans. Technically Republicans could lose the senate and win the presidency. Market had a clean win priced in for Democrats and it always tightens up as you get close….and this time it’s no difference!!! Global economic recovery cycle is fading with stimulus cuts and pandemic waves. Bond and Currency markets are sending warning signals!!!
US 10 year bond yield is following 30 year bond yield to break above 200 day MA for the first time in nearly 2 years. US Fed will have to come get involved but markets are realizing that they are losing control. The more they expand their balance sheet to remove credit/liquidity crunch, the more supply coming to the bond market. The global investors are falling out of love with weakening USD and low yielding US bonds. Chinese Yuan and Chinese bonds are looking like a bargain on relative economic cycle while even EU is looking better on Euro strength.
Overnight US market had another choppy day...started with a pullback to -150 odd in the first few hour and then recovered to flat by lunch and maintained the stimulus optimism to climb through the afternoon to finish up +150 odd. Russell lead the day with NASDAQ lagging behind. Banks, Energy and Health Care top the sectors while Tech, Property and Staples were the worst. Bonds lower, US$ higher, Oil higher and metals lower. After the cancellation of the second US presidential debate, third and last one will start in a few hours. Swing states are close while overall the President is behind and lagging on campaign budget as well. Expect fireworks to close the gap. It always gets close as it gets closer and uncertainty will rise...and markets don’t like that.
Remain nimble, contrarian and cautiously pragmatic with elevated global macro risks!!! Buckle up...it’s going to get bumpy!!!
Empire strikes back...US Fed using currency war to avoid economic Death Star!!!
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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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