ABX Weekly 17/06/2020

Market Update  

It seems there is no end to the Central Bank bubble. The Fed Reserve continues to implement any form of QE it can to stimulate the economy leaving the system even more saturated with cash. At the risk of giving the system indigestion the Fed will continue with its stimulus program with the hope of preventing any potential economic crisis. All this really does is kick the can down the road for future generations to deal with. US debt currently sits at $25 trillion dollars. As a result, Bond prices continue to rise, yields fall, and people find themselves in familiar territory – buying already overpriced equities in times of incredible uncertainty. 

There is no doubt that the equity market will remain volatile at the very least with even the hint of negative news sending it into a tailspin. With people already on edge with the current pandemic, fears of a second wave will surely create havoc in financial markets once again. That said there is probably no better time to be invested in bonds. The bond market in Australia has remained firm and steady and yields on some of our preferred names are still holding around the 5% mark. 

In other news President Trump announced he was considering launching a $1 trillion infrastructure fund to help revive the economy most of which would fund road works and bridges with the balance of the funds devoted to improving 5G and rural broadband. 

There is also some talk that China could eclipse the US in terms of power by the year 2030. It is estimated that China’s GDP will be almost twice the size as the US in terms of purchasing power and it will hold the top position as Asia’s most powerful nation. With the world upside down at the moment, anything is possible. 

A problem for the future is how the Fed and its peers can extricate themselves from the mess they’ve created and the unintended consequences and side effects of this, most damaging of which is excessive risk taking and leverage – as some have said there is no exit path without implosions.  

Until next week!