Sunset Strip - 30 September 2020
Local market was under the pump all day as risk off trade into month/quarter end. Global investors were the dominant players and big lines being crossed in a lot of stocks as fund managers were getting out of their holding that they did not want to show in their quarter end reports. The market was falling with AUDUSD despite positive data from China. The bashing was all over the field as global to local investors were locking in profit. The month end asset allocation trade that boosted equities seems to have finished and there isn’t many positive catalysts to support the market in the current weak seasonal period.
US presidential debate today has added to the negativity of the markets. It was a complete and utter debacle. It was more like a couple of primary school kids arguing in the school grounds than a presidential debate watched by millions. Trump supporters wanted the attack mode to unsettle and show Biden as unstable and weak. Biden supporters wanted defensive mode to deliver a calming pitch while not getting bullied. Biden surprised everyone by taking the attack to Trump and that meant it all went belly up as far as any presidential standard. In Trump’s defense, there is only one strategy left…attack and attack. In Biden’s defense, if you don’t attack…you are seen as weak…so have to get your hands dirty but stay presidential…easy to say but tough to do. The Fox News moderator could barely get one person to speak for a minute before the other one jumps in. Biden probably won by points in an ugly fight because Trump is behind on the polls and needed a knockout and he did not get that. Frankly it would not have changed anyone’s view…if anything the polarized US will pick what they want to enforce their existing views. But the markets will now look at Biden as a potential challenger and that will raise risk for elevated market valuations due to higher corporate tax!!!
US market had a negative and volatile overnight as it waited to see how the first presidential election debate will play out. DOW was down over 200 early in the day but recovered some losses to finish down 130. Bonds and Gold higher on risk off trade. US$ weakness on weak economy and election elevating risk of more handouts to buy votes ahead of the polls. EUR to A$ getting pushed up with commodities but Oil struggling as growth weakness and pandemic weighing on demand outlook. All the major regions are seeing substantial pandemic risk with numerous regions likely under reporting and/or under testing. Gold and Utilities were the only positive sectors while Energy and Banks were the worst. US bankruptcies and store closures in retail hit record levels in H1. If you missed Gold before, time to look at it again!!!
The next few weeks in Australia will be global investors versus local retail investors as most fund managers are away for school holidays.
Remain nimble, contrarian and cautiously pragmatic with elevated global macro risks!!! Buckle up...it’s going to get bumpy…new month/quarter ahead!!!
Not already a Livewire member?
Sign up today to get free access to investment ideas and strategies from Australia’s leading investors.
MORE ON Equities
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...