Weekly Market Commentary commencing 21st September 2020

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Equity markets closed a volatile week lower, lead by the over valued Tech sector. The great beneficiaries of the coronavirus recession and the economic rebound, has been the tech sector. Markets have never seen liquidity at these levels and much of it has flowed to the tech sector, who were natural beneficiaries of closed economies. The ‘V Shaped’ recovery has seen economies re-opening and come roaring back, causing a re-evaluation of the Tech bubble. The virus infection rates are high, but mortality rates are relatively low, as treatments improve and the vaccine appears to be coming in the near future.

Central Banks have lowered interest rates and launched QE Infinity across the world. The historical and unprecedented levels of liquidity has forced rates lower and assets bubbles to expand. The economic recovery has allowed the safe-haven Dollar to relax, allowing the EUR to recover to 1.1840, while the GBP trades 1.2950. The UK is battling through trade negotiations with the EU, which has impaired the GBP, while re-opening of the economy has also been a testing time for the British economy.

The trade exposed commodity currencies have been refreshed by the flagging reserve, but remain extremely vulnerable to US/China relations. The political lock-downs and border closures have and will continue to devastate both the NZ and Australian economy. Politicians must change course or risk long termserious damage to business and their economies. The AUD slipped back below 0.7300, while the NZD has regained 0.6750, despite devastating economic data. There are many existential risks out there, but the recovery is well under way, while the virus looks to be coming under control.

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