ABX Weekly 11/03/2020

Market Update  

 

Global markets continue to be driven by fear and the recent 50bps emergency cut from the Fed did very little to calm markets. Money has moved aggressively out of risk assets back into safe haven assets, causing Government bond yields falling to new all-time lows across the yield curve. The entire US curve was at time below 1%! Our 10y Government bond followed this global trend and hit a new all-time low of 0.55% before bouncing back up to 0.80% (remember it was only a couple of months ago when it hit 1.40%). 

 

The recent massive fall in oil prices which in theory should be very good news for consumer and business is however currently getting used as a further argument to sell off markets. The big question of course on everybody’s mind is what it will take to calm down markets again and bring back some more “normality”. 

 

The ball is now clearly back in the corner of the governments and the next step will be some massive fiscal response from the governments with everyone looking once again to the US with Donald Trump preparing to unleash some stimulus.  

 

Our government is preparing a multibillion-dollar economic stimulus package which will focus heavily on tax relief measures.  Big business groups said one of the Morrison government’s tax breaks to be included, a business investment allowance, must be as broad-based as possible to be effective and not subject to low spending caps, or limited to investment above normal levels. The sectors most impacted so far have been tourism and education and the big question is also the overall impact on the supply chain and possible shortages which will negatively impact business.