November to remember

Markets have had a massive November. The US and Australian markets are currently up by around 11%, with Europe up even more.

Further, we’re heading into a seasonally strong time of year for markets (December and January).

The US election, record low interest rates and QE and vaccine optimism have combined to put a rocket under equities.

In Australia, financials have been big movers over November. The Big 4 banks have all surged higher. Big resources – RIO/BHP/FMG have been less spectacular but still quite strong. While the iron ore price remains at US$120/ton, all will be making massive amounts of money.

So it looks like happier days on the ASX again. With US markets back to all-time highs, there’s no reason why our market can’t follow.

A bit of a surprise for me has also been the relentless strength of the $A which is now nudging US74c. It’s actually moved a fair bit higher since the RBA’s most recent move to cut interest rates by 15 basis points and expand its bond buying program.

The RBA will struggle to tame it now that it has pretty much emptied its bazooka (bar plunging into negative rates). As a result, US strength (or lack) looks like it will dictate where the currency goes in the short-to-medium term. Australia’s better current performance in terms of case numbers has probably contributed to the grind higher in the currency.

That probably won’t last forever, but while commodities remain on the front-foot, the $A looks on pretty sure footing.

Sit back, strap in.

November to remember

Market bounce back

Well, based on my last blog I have a partial egg on the face.

Trump did not win as I thought – and had a smallish wager on. I won’t get into the various conspiracies about the legitimacy of the result.

However, I do claim credit for my call that the market was an asymmetric bet as downside was priced in.

Markets have roared higher since the Election, despite the ‘stock market President’ coming off second best. No more ‘Thank you Mr President’ twitter requests for your 401k performance.

Markets seem to have shrugged off CV-19 worries. Further, there has been a big swing to ‘value’ shares from ‘growth’ (think Big Tech – FB, GOOG, TSLA, Amazon etc).

We all felt it was coming. Some of the valuations on quality, but unexciting value stocks were getting crazy. Further, many of these stocks have benefited from what the market took to be good news in relation to a vaccine related to CV-19. As a result, some of those stocks hit hardest (airlines, cruises, discretionary retail) bounced back hard.

In many ways, the market has shrugged off CV-19. And if history’s any guide, they were well justified in doing so.

Market bounce back