• Clifford Bennett, Chief Economist at ACY


• 24.09.2021 12:45 pm
#stock

US data deteriorated markedly.

Stocks up, then sold the last 4 hours.

Victoria turning NSW on Covid.

No one wants to hear it, or know about it. Such is the "look the other way" pandemic. That's fair, it has all been so very tiring.

Nevertheless, Victoria is on a bad acceleration trend with only half the level of testing being conducted in NSW.

Proper national economy re-opening will remain hesitant and problematic should the health system come under considerable strain. It looks like the only way forward is to suffer an experience akin, but hopefully not as bad as the UK, and to do so with a high level of vaccination will certainly help.

There will be a high human cost. We should not assume that there is no break point in political will, should hospitalisations become too high, A reassertion of some form of restrictions on movement is still a risk. Albeit reduced.

Economically, there will be several impacts. As well as the un-vaccinated being denied access to many businesses and events, there will also be the drag on the economy from the vaccinated remaining or becoming increasingly cautious of undertaking those same activities. We are already seeing steady growth in hospitalisations of the vaccinated, as general vaccination levels rise. Then, tragically, there are the many businesses, small and medium sized, that have already closed permanently. Small business employs 70% of the Australian workforce, and even marginal movements in this sector have a significant impact.

The forecast here its there will be an immediate opening up surge, but such activity will fall back to below 2019 levels subsequently.

US Manufacturing Index Kansas Fed, is collapsing.

US IHS Market Composite Index collapsing.

US New Jobless Claims now trending alarmingly, and at 70% higher rates than pre-Covid.

NASDAQ still well down from the highs, but making a valiant effort to rally. Favoured scenario remains that there is indeed downside risk to be considered.

A move below that trend line support across recent lows, at 14,850, would likely trigger a further 1,000 to 3,000 point decline. A move above resistance, 15500, would be very encouraging for a get out of gaol bullish outlook. Within that range there are significant levels, but with a greater tendency to chaos. Favour a faltering of the rally.

Is the UK a guide for Australia? Re-opening leads to fresh surge leads to consumer confidence rolling over again.

On the bright side, in Australia at least our Universities are still highly ranked globally. As a Sydney Economics graduate it is nice to see continued strong performance. Below, a snippet from today's AFR.

Click on image or use this link to view https://www.afr.com/policy/health-and-education/how-sydney-uni-outranks-oxford-cambridge-and-harvard-20210923-p58u5u

AUS200 This market is still in break down territory. Despite the massive bounce. Above resistance at 7430 would tend to negate my bearishness, but this appears unlikely at this stage.