US election making 2020 confusing again
Local market was completely confused and volatile before finishing almost flat for the day as US election results came through. The last two days of market optimism (i.e. 1000 DOW points) was based on data supporting a blue wave taking over all three layers of government to give policy clarity. The data since the closing of the election has flagged that on its head. Markets went red then green and then it’s just confused. Bonds, currency and commodities are moving around substantially with volatility. NASDAQ futures moved over 4% and triggered trading stops. If nothing changes after the election, then we are not going to get the stimulus package that the market is expecting to support the market multiples. USD and bonds started to move higher through the day on risk off sentiment. Short covering in futures were moving markets around like a yo-yo. We are not out of the woods yet in regards to the US election as postal/pre votes at close contests will have to be counted and may even attract legal challenges. In the meantime, pandemic does not take a break and US is going hyper mode while Europe is moving into lockdown restrictions to deal with it. Irrespective of the election, pandemic is going to deliver global growth downgrades and more money printing!!!
The latest data for the presidential and senate race from Reuters shows that Trump has more pathways to get to 270 than Biden while senate remains tight. The data will move around as more postal/pre votes are counted. Expect more volatility as market hates uncertainty!!!
Overnight the US market moved up hard for the second day in a row as markets price in blue wave. Machines are chasing the inflation trade with democratic policies. Bonds and USD lower while Gold and other commodities on the move. Russell outperforming the rest. The momentum is building out of high growth to cyclical growth. Miners are positioned perfectly for this inflation and value trade. Industrials, financials and retail the best while energy was the only negative sector.
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...