Sunset Strip - 26 October 2020
Local market started positive before sliding into negative territory as global traders were chasing the AUDUSD lower. Weak AUDUSD pushed down Banks and Miners helping Health Care and local defensives like Staples and Telecom. The covid19 pandemic is out of control in most regions while economic recovery has started to fade. China remains the only region to manage economic and health recovery but Australia has managed to ramp up geopolitics against the main trading partner. State and federal government level miss management and fraud are getting found out almost on a daily basis while RBA is debasing themselves away from relevance to Australian economy. Australia is unlikely to be able to defend itself against a global deleveraging meltdown without Chinese help. Bond and Currency markets are sending warning signals!!!
The macro cycle is moving from high multiple growth to cyclical growth stocks. Russell outperforming NASDAQ. The last time we had such a switch was in DotCom bubble. Is it different this time? All bubbles eventually do burst…it is a matter of time!!!
Friday overnight US market fell most of the day to be down over 200 before recovering in the last few hours to close down 30 odd. Russell again lead the indices in positive territory except for DOW. Bonds ticked higher while USD and commodities were lower. Retail and Property were the best sectors while Energy and Tech were the worst. Pandemic is going rampant through EU and US as Fauci said Trump hasn’t been at Covid updates for months. Debate was a potential catalyst but the best performer was the moderator with the mute button. Trump needed a clean big win and it wasn’t that. Each side will claim it but it is all about swing states and Biden leading a few and the rest are too close. US Election always gets close into the event and this one is no different. No change to stimulus chat...more talk and very little action. Vaccines are progressing at expected slow pace. Stimulus and vaccine unlikely to be in play for election.
Remain nimble, contrarian and cautiously pragmatic with elevated global macro risks!!! Buckle up...it’s going to get bumpy!!!
Not already a Livewire member?
Sign up today to get free access to investment ideas and strategies from Australia’s leading investors.
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...