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Hedge Clippings | Friday, 12 February 2021
Overnight the Dow reached new highs, while the broader S&P500 and the Nasdaq hovered close to theirs, with investors anticipating further US stimulus, and optimistic about the effects of vaccinations taking effect. In addition, the number of Americans seeking unemployment benefits fell slightly last week to 793,000, although job cuts remained high despite a substantial decline in new COVID infections.
Although the US economy isn't travelling as well as Australia's (see next paragraph), maybe they're the first indications of light at the end of the tunnel. Reuters report that employment at small and medium sized business are rising slightly, and traffic to retail stores is improving since last year... more
Meanwhile, in Australia it's a case of What Recession? This week we noticed: Consumer confidence reaches its second highest level in 7 years. Housing market confidence: those with a mortgage confidence at decade high levels. Job ads lift 6.5% YoY; Job Vacancies hit 19-month high, all as detailed in this article from Comsec via The Bull.
But beware: Longview Economics' latest "Longview on Friday" newsletter (Subscription Only) focuses on the strong evidence for an asset bubble in global financial markets, although warning that bubbles can go on much longer than expected. Longview note that four things create a bubble, while one thing ends them: Bubbles burst when cheap money is removed. Inflation (or a resurfacing of inflation) remains a wildcard risk to current liquidity and the supply of cheap money.
Hedge Clippings can't see the end of easy money anytime soon, even if locally there's an end in sight to Job-Keeper (for most it ended in September last year) and that 85% of households, presumably awash or semi awash with cash, are facing having their normal mortgage repayments resume. Meanwhile, in NSW every adult is eagerly awaiting $100 worth of "entertainment vouchers" from the State Government, presumably timed to arrive (in Hedge Clipping's case, thankfully) after the end of Feb Fast.
It's not a term to be found in many economics 101 textbooks, but generally Australia's economy seems to be going gangbusters. The only cloud on the horizon might be that increased competition for labour might boost wages and thus inflation - but that paradoxically is what all the economists (and the RBA) are hoping for.
January and 12-month Fund Performance:
As February and March 2020 were severely testing, there'll be plenty of managers (and investors) looking forward to seeing their 12-month numbers starting from April 2020. That's still a couple of months away, but in the meantime the ASX200 Total Return recorded a negative 3.11% in the 12 months to the end of January. By comparison, the average actively managed Equity Based fund returned +8.62%, with Long/Short funds topping that at +10.67%, closely followed by Equity Long at 9.76%. These two strategies comprise around 60% of AFM's database, and you can get the full breakdown here thanks to our current "Free Trial" offer.
Finally, in case you're missing your daily dose of "The Donald" in the news - who no doubt helped Twitter to post record revenues, growing by 28% to US $1.29 billion in the last quarter of 2020 in what the CEO understandably said was an "extraordinary year" - from the BBC comes this 12 minute video which looks behind the news at what actually happened, or spearheaded the attack on the US Capitol on January 6th. Scary stuff.
News & Insights
The pivotal fight between China and the US is over the Microchip by Magellan Asset Management
4D's 2021 Outlook by 4D Infrastructure
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