The near-term (3 month) response from central decision makers on COVID lock-downs will be pivotal to whether global economies maintain recovery momentum into the new year. From mine, business (large and small) clearly wants to get on with things… but will they be allowed?
Whilst Biden has several pathways to achieve the magic number of 270 (he’s on 264 at the time of writing) – markets have priced in a Biden Presidential victory.
But it won’t be the “blue wave” most poll predicted… so what does that mean for stocks, bonds and the US dollar?
It’s very important we balance the near-term ‘optimism’ in equities with what we see with leading macro indicators such as gold, the US dollar index, treasury bonds and credit default swap spreads.
For example, whilst bond investors are typically early, over the long-run they are generally right.
Last week I talked about the (positive) impact on various assets should the US dollar continue to weaken. One of the more obvious beneficiaries are precious metals. Gold has since made a new record high and silver is up over 20% in a week
As the market (and economy) wrestles with the re-opening mess of COVID – there is another tail wind giving the market a boost. And it’s in the form of a much weaker US dollar..
As optimism around easing trade tensions continues – expect this to weaken demand for the safe-haven currencies like the US Dollar and Yen.
In short, whilst we see risk-on – expect currencies like the Aussie Dollar and Euro to catch a bid.
The 19-month weekly bullish trend for the US dollar index continues – however we’re seeing near-term weakness. Could the dollar be headed lower in 2020? If so – what’s this mean for investors?
