• Clifford Bennett, Chief Economist at ACY Securities


• 08.09.2021 05:00 am
trading

CBA joins ACY Recession forecast.

We say it first.

Click here or on the image above to view now.

While AMP and Citi have talked about the risk of recession, they have yet to fully catch up.

This has, to use an economics term, been a 'no brainer' for some time. Why there were headlines that Australia had escaped recession on the basis of the positive Q2 data, we will never know. it was always going to be a positive, and similarly, the path out of lockdown was always going to be much longer than politicians or any of us would like. The reason we have been highlighting the hospitalisations issue, all along, is for its absolute impact on restrictions and how quickly they can be removed. Unfortunately, our domestic economic performance is all about political decision making around these issues at the moment. It will not be as easy as, vaccinations fix everything.

Even major US media, has now begun to point to Israel as to what the whole world may well expect. That is, waning efficacy of vaccinations. It could still be the case, that third booster shots hold for a greater duration than the first two shot 2-4 months. This would be fantastic. However, we simply do not know yet, because third booster shots are only happening in Israel, and sporadically elsewhere, just now. The Delta variant continues to prove itself a rather hardy adversary. Only time will tell.

What we do know for certain, is that two shots of vaccine do not hold as we wish they would.

For NSW, and then perhaps, Victoria, to be coming out of lockdown Is badly needed on all levels. Especially, to alleviate the psychological pressure it brings . We have to get our economy and schools going again, but to do so with a heightened false belief of the effectiveness of the vaccines, is only to set ourselves up for returning to where we have recently been. Lockdowns again. I cannot imagine anything more devastating to people and the economy than for lockdowns to be re-instituted in 6-9 months time. This is where Israel and the US are. Lockdowns probably will not happen, but they are again beginning to be talked about.

The key point of today's comments, is to highlight that to come out of lockdown relying on vaccination levels, before we have even reached the peak hospitalisation curve, is an extremely dangerous approach.

AUS200 is at risk of collapse to 7000, even 6900.

US markets really showing signs of strain, and this will not help the Australian bourse. Please see US500 comment. As the realisation of a very real and potentially prolonged recession grows.

SP500 that creaking sound before a branch snaps.

This is only a modest down move, but it is the way in which it follows that post Jackson Hole struggling rally that is causing concern. Significant concern.

It is worth noting, that this current bout of weakness is based on concerns of the impact of the Delta variant. Whereas in Australia, the market has wanted to rally, local funds buying, despite the Delta impact and even most of the economy being in strict lockdown?

As highlighted yesterday, when will the penny drop? Possibly, starting today.

Bitcoin being made legal tender by El Salvador, says more about the country than the crypto.

What is a very common aspect of markets throughout history, is that they can sometimes peak on the last of the good news. Is El Salvador that for Bitcoin. It is not really a badge of honour and also highlights the cost of crypto transactions. To be 5% in El Salvador. Imagine, going to the car dealership, that will be X bitcoin, large spread already included, and on top of that there is a 5% fee. Oh, and also, the price may change by 10 or 20% this afternoon. Welcome to crypto world. Car crash maybe.

Hopefully the market can recover from the immediate sell-off, but it is worth keeping an eye on.

German ZEW Economic Sentiment Index continues falling.

The Delta impact is a growing global phenomenon.

Not a passing state of affairs at all.

As governments around the world begin to swamp markets with bond sales, and raise taxes, to pay for the recent massive stimulus and spending, inflation quietly eats away in the background. Negative. Not at all.

Just 'looking out the window' at what is really going on. Highlighting the advantage of well planned hedging strategies should things continue to tumble.

To come out stronger the other side of any economic or asset downturn, is the ultimate platform for true wealth creation.