Sunset Strip - 28th October 2020 - Global macro trade delivers a positive day

Mathan Somasundaram

Deep Data Analytics

Local market fell at the open before global fund managers were back buying our market for the currency bounce and pushed it back over to slight positive territory. Local fundies were on the side lines while global money was moving from US/EU into Australia for the China exposure and currency/commodity trade. The global macro trade chasing currency was missing for the last few days but seems to be back as pandemic waves run rampant through EU and US. RBA was out there talking up what they can do but they only managed to confuse the market. RBA claims they have options to drive recovery, recession is over but they are going cut rates soon. RBA is clear as mud but that’s what happens when you have wasted your ammo boosting asset prices instead of economic recovery!!! Reality is that they are a candle in the global currency trade wind and AUDUSD went up despite this calamity. Australian government continues to have border wars with states to distract from the lack of reform policy to drive growth. We may be fighting with China but they are still our only hope for sustainable recovery in most sectors!!!

US stimulus is completely off the table before the election while Covid pandemic is hitting daily records in most parts of US. With over 70m pre voting already (i.e. more than 50% of people who voted in the last election), US election results are unlikely to come out for days after the election…may be even a week. The presidential election is tightening as expected while the popular vote may favour Democrats, it is all about the 5-6 swing states. The worst case scenario for the markets is Republican president with Democratic Senate and Congress. In a contested election as most are, anything is possible. Markets don’t like uncertainties but that’s what we have in EU and US while economic data continues to show the recovery is fading. We had the returns over the last seven months and now the risk is playing catch up!!!

US Government may be ignoring the pandemic but the US consumer shopping pattern suggests the hoarder mentality is starting to play out. Political pressure and out of control pandemic suggest lockdown restrictions are expected post-election!!!

Overnight the US market was mainly down with NASDAQ staying positive. DOW was down between 50 to 150 most of the day before sliding lower in the last hour to finish down 220. NASDAQ being boosted by lockdown stocks as the pandemic is ramping up in all parts of EU and US. EU said that they won’t have a vaccine out to all of Europe till 2022...assuming we find one soon. UK large scale test shows the antibodies post Covid does not last...hence the herd immunity strategy won’t work. US has no plan to curb Covid for political reasons and that means it’s going to go wild well into November. Bonds, Gold and most commodities were a bit higher as USD came back a bit. Gold and Tech were the only positive sectors in a market starting to accept lockdown restrictions and downgrades for Q4 with Covid winter made worse by political issues. No stimulus and prolonged election uncertainty to further dent the fading recovery in the US economy.

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

Mike Tyson > "Everyone has a plan until they get punched in the mouth."

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 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...

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.