Sunset Strip - 28th September 2020
Local market was volatile and directionless all day before ending the day slightly lower. Tech and Property were the only strong positive sectors on the back of US markets and Government weakening lending standards. Today’s trade was dominated by global investors chasing the currency in a low turnover day. There was no real movement in bonds or currencies to drive a strong sentiment in any direction.
Victoria seems to be getting the pandemic into control while NSW low testing creates a worry despite no cases. Government budget update coming is supposedly jam packed with tax cuts and handouts to corporates to keep going while cutting back on job keeper and job seeker. Given the recent track record of dividends from companies with no wages or rent, this strategy is likely to deliver very little multiplier effect in a weak economy.
US macro uncertainty is elevated with President’s tax returns and new supreme court nomination to dominate the media cycle. Pandemic continues to spread while economic data starting to fade. Just about anything could happen in this election cycle…even a useless trade deal phase 2.0 with China!!!
Europe has officially become a basket case like Japan. China will gradually move away from USD as the main trading currency with Russia and Middle East. USD may find very little demand as US Fed issues trillions of dollars’ worth of bonds in the next few years.
US market had a positive day on the back of tech, property and cruise stocks jumping 10% on broker upgrade. Bonds and US$ higher and in turn EUR, A$ and commodities lower. The main thematic over the last week is investors running out of EU are boosting other markets like US and Aus. European markets were weak. US economic data keeps showing the recovery cycle fading...durable goods orders were holding up but weaker than expected. We are heading into the most volatile month of the year in the US and that’s the case even if you remove crashes and elections.
The next few weeks in Australia will be global investors versus local retail investors as most fund managers are away for school holidays. We have a month and quarter end in a few days and it is likely to tread water for the next few days.
Remain nimble, contrarian and cautiously pragmatic with elevated global macro risks!!! Buckle up...it’s going to get bumpy!!!
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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...