Weak global economy is sailing into another virus minefield as leadership mistakes pile up

Mathan Somasundaram

Deep Data Analytics

Local market started negative and kept sliding to close near the low of the day despite Iron Ore popping hard on Brazil issues. US market was weak but made late recovery on the back of banks. European markets were bashed overnight as the faster spreading version of the virus in UK has moved into EU. Lockdowns are expected to last into Jan and trade pathways are being affected. Inflation is expected to rise as supply chains are disrupted in many categories…esp in food. US and Australia are not blocking UK despite signs are the new virus is already in both countries. The same mistake that was made previously about Europe that costed both countries is being repeated. It is the definition of insanity to keep doing the same thing and expecting a different result. USD bounced overnight on risk off and that hit commodity prices and most currencies. Falling AUDUSD took down the banks while weaker commodities weighed on miners. Health Care and Property were the only positive sectors. Sentiment remains weak and bond yields remain high despite stimulus package being passed. We are unlikely to see any more stimulus move till inauguration. It is a good time for bond market to force US Fed’s hand by selling off and driving inflation higher. Bond market is holding the US Fed hostage while Equity market could be collateral damage!!!

US bond market is flagging that reflation has started and US Fed rates have bottomed. High growth stocks trading at multi decade high multiples need bond yields to go negative but that isn’t what the data is showing. Inevitably economic woes will need more stimulus and that will drive more USD debasement. All the roads lead to reflation and that means lower multiples for markets!!!

Overnight US market was mainly negative with DOW being the only index sneaking into positive. European markets were belted on lockdown and new virus variant from UK. Like what happened same time last year with China, countries are reacting too slow and countries like US and Australia are doing nothing for political reasons. DOW started down 400 and then ran up 100 and finished 40 up. Banks and Nike were the outperformed. Banks having a pop on regulators watering down dividends and buyback restrictions after bailouts. VIX has popped and USD ticked higher on risk off. Bonds ticked higher and commodities were lower. Banks were the only positive sector while Tech and Gold were mainly flat. Nearly $1trill with $600 cheque next week and $300 boost to handouts were not enough to boost sentiment in the United Socialism of America. More money printing looks inevitable and UK virus variant is probably in US and EU. We have already got it in Australia but due to politics we won’t do anything about it.

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.

Comments

Sign In or Join Free to comment