Sunset Strip - 29 September 2020
Local market had another volatile and directionless where global investors were the main players and they were chasing the currency trade all day. The market finished mainly flat just like the AUDUSD. Tech was the main outperformer while Banks are running out of steam from the regulatory boost. Pandemic risks are reducing but weak testing numbers are a worry. Australian government is again talking up opening up potential. Even talking about weakening quarantine regulation for overseas travellers. Travel and other service oriented stocks had a decent recovery. If it goes wrong, Federal government can blame the States. Since they don’t take responsibility for anything and do not have a reform plan to drive the economy, it is easier to blame others to create a distraction. Sadly, we are becoming more like US every day and we can clearly see where that is heading to!!!
US election risk is going to start taking centre stage as the first debate is tomorrow. Recent leaks have elevated the risk of the debate becoming full blown personal attack forum. And don’t rule out last minute meaningless trade deals, Middle East peace deals or even cash handouts to bolster support. Tax, Health and Economy are going to be the main policy areas but they are likely to play a minor role.
US market were positive overnight on the month/quarter end macro trade. The month/quarter end macro trades by passive funds move from outperformed asset class to underperformed in the last few days of each period…solid in month end but even bigger in quarter end. Stimulus talk is hoax while the politicians are preparing for the first US election debate. Don’t expect policies. It will be all about personality clashes and alternative facts. DOW started up over 500 and stayed there before fading into the close to 400 odd. Passive money was selling US$ after recent bounce and buying value in Financials/Energy and boosting underperformed Russell. Russell lead all indices by a margin. Gold lead the commodities higher on US$ weakness. Pandemic continues to grow in all parts of the world ex China. Deaths have passed 1m and US owns 20% of that…quite scary failure for a global super power!!! When the macro trades finish, we are likely to return to another month of negative sentiment in October as we run into the election. Remember October is the most volatile month for US market...even after stripping out 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!!!
Winter is coming for US and it's bringing recession, pandemic and election uncertainties!!!
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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...