• Clifford Bennett, Chief Economist at ACY Securities


• 06.12.2021 11:00 am
#stocks

I launched this forecast live on ausbiz TV at .7745 back in June.

It was an aggressive forecast at the time, that a significant Australian dollar decline was imminent. Made in the middle of a sustained consolidation period when everyone else was still bullish. The rest of the market was expecting 85 and 95 cents by now. Remember those headlines. Few took my forecast seriously. Here we are. I recently produced a new forecast for 65 cents in 2022. With risk to 58 cents, in 2023.

The big stock crash continues apace.

We have been expecting, and indeed again forecasting this major trend development in global equity markets. Last Monday, we suggested a bad week ahead for stocks, and for this week, I am concerned things could get worse.

There is risk of downward acceleration.

We should all have taken strong defensive measures well before hand. Three weeks ago, I said the very wealthy should immediately take 90% of their risk off the board. Wealthy 50%. For the yet to be wealthy, this was a time to be very aggressive and active. No change.

Developing Omicron Outlook.

Senior health officials and doctors in South Africa are coming out to say specifically that it is wrong to see Omicron as a milder disease.

They are experiencing a gathering surge in hospitalisations and an over-representation among children under 5 years of age.

This will be of great concern to all of us. There is no greater force than the purpose of looking after the very young.

If this worrying trend were to continue globally, we may will see a high level of 'voluntary semi-isolation'. Family members venturing out only for essential tasks. No government mandates necessary.

When looking at the economic and therefore eventual market trajectory over coming months, it would be wrong to suggest a variant that re-infects previous Covid patients three times faster than Delta and is overly represented among children, is somehow a positive development.

The world was moving toward a moderate level of herd immunity. A journey with some time to run. Omicron now needs to be considered a new serious threat until the real research results are in.

That research, of the variant's characteristics and vaccine efficacy against it, are unknowns for perhaps another week. It takes time for the lab studies to be done. This is what we are waiting for.

Hopefully, the research results are more encouraging.

US Non-Manufacturing PMI rose sharply.

Suggesting the worst of the Delta surge slow-down was finally behind us. It remains to be seen how Omicron will un-fold, but should it take hold, there could be another wave of economic moderation.

US Job Gains are declining though.

This is a well established trend now. While still within the realms of reasonable economic progress, suggest it is reason enough to remain a little cautious.

AUS200 staring into the abyss.

It is a quick step to 7000. Risk 6800. The bigger picture outlook needs to be considered in the context of declining China/Asian relationships, and the long term travel and migration impact due to people wanting to stay closer to their families than ever before.