United Socialism of America needs more stimulus...a lot more!

Mathan Somasundaram

Deep Data Analytics

Local market had another positive day on global traders chasing the currency/value trade in another low turnover day. Local fundies look to be already on holiday mode with private schools while public schools still have this week to go. Bond market remains weak and putting pressure on US Fed and ECB to get the printers going again. Aussie 10 year bond yield is firmly above 1% now and will drag US bond yield higher.

US markets continue to outperform the fading economy on the view that US Fed will save them. US economy has clearly stalled while pandemic lockdowns are starting to play out. Just about every sector in the US is swimming in government handouts or tax exemptions or legal protection from the US government. US corporates have enjoyed unparallel socialism while the trickle down economics has mainly failed. Inequality has blown out while the wealth transfer during the pandemic has been historical. The current trend suggests that US will be moving towards substantial money printing and this time it will be targeted towards main street than wall street. If there is anything we have learnt from the failed Japanese stimulus model is that the political pressure is too high to ignore the fading economy despite historical stimulus. Once you go down the rabbit hole, there is no plan B. Endless money printing will see further USD debasement and more frequent boom/bust cycles. Are we already too far down to turn back from “United Socialism of America”? Time will tell but history suggests we are!!!

US 30 year bond yield has now gone above S&P 500 dividend yield. The risk weighted return in the bond market is better than equities as USD continues to slide lower. Economic data continues to crater and may flip USD, Bonds and Equities on a risk off trade.

US market on Friday night was up on reflation trade despite another data point confirmed that the economic recovery has stalled. Nonfarm payrolls were supposed to drop from above 900k to below 600k but it came in at 245k. That’s not a miss...that’s danger territory. US bond yields hit 97 bps, USD ticked up and Value outperforming Growth. Reflation has Russell up 2.4% while NASDAQ was up 0.7%. Commodities ticked higher as stimulus hope in the US covered Brexit mess in EU. Yes...BJ has a lot of DIY mess to deal with in UK. San Francisco just issued stay at home order for Bay Area. More to come. Value sectors in Energy, Property and Banks were the best. Bonds are flagging reflation panic ahead.

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.

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.