Weak US economic data to deliver more currency debasement
Local market had a surprisingly positive day despite the negative lead over night from global markets. It was driven mainly by the end of month macro asset allocation trade out of US and into Asian and proxy markets like Australia. It’s a currency trade to take advantage of the rising AUDUSD as USD remains in down trend. US economy is stalling without stimulus as recent housing data confirmed the weak consumer, job and retail data. US Fed is expected to come back to the bond market to keep long yields low and debase USD further. The lack of reform outside tax cuts have left most western economies with structural issues that are coming home to roost. Election mess remains in the way of stimulus negotiations while pandemic continues to break records for the wrong reason. CDC expects restrictions will come in ahead of the Christmas and New Year holidays after Thanksgiving likely to be a super spreader event.
Geopolitics is being played out in almost every part of the world. Russia tests new nuclear bomb and has a go at Aus. US is about to blacklist more Chinese businesses while in power transition. UK is moving to remove China tech in their communication platforms. Israel is moving into Palestine regions while being implicated by Iran on the attack that killed their senior nuclear scientist. US, Israel and Saudi Arabia are trying to curb Iran ahead of transition. China is taking more steps to curb Australia. Qatar is looking to curb meat deals with Aus. What could go wrong when you are sitting on asset bubbles around the world while economies are still stuck in recession? Don’t worry…Central Banks are about to roll out their money printers and save us all…well there is no plan B!!!
RBA may be on hold but the banks are flagging rates are going lower. That probably explains why the banks are giving deals to borrowers to move to fix rate. Two of the big four were on regulators attack path but market does not care as they feel nothing will come out of it. Historical trend suggests markets are right to ignore regulators like the banks do!!!
US market rolled over overnight into a profit taking risk off day as pandemic woes keep rising. All major regions were red as were all US major indices. Russell was hit the most and NASDAQ fell the least. Bonds were mainly flat and USD higher. Oil and Gold a tick lower while Copper higher. That delivered the best Nov since 1987...no omen! Geopolitics everywhere you look and it's now run by number of countries. China not happy with Australia and they are not being subtle about it. Central Banks need to buy more bonds or reflation risk. Bitcoin is moving again on money printing and we may have seen the low in the Gold pullback after month end asset allocation adjustments. Gold was the best sector with Tech and Health Care are the only green sectors. We may have taken a big bite out of the Santa rally.
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...