The pause that refreshes, at least for Australia
After powerful market rebounds from late March to early September, led by the US, there has been a pullback recently. Is this the pause that refreshes or the start of something more ominous? This note analyses the key positives and headwinds to determine which markets are best placed for the next phase.
On the positive side:
- strong progress toward a vaccine(s) and improved testing and treatments of COVID-19;
- ongoing powerful monetary stimulus, with Australia’s RBA stepping up; and
- signs of recovery, particularly China, but Australia is seeing a strong recovery and the US has positively surprised.
On the negative side:
- second waves are emerging in Europe and stubborn in North America;
- forward PE valuations are stretched, but not against rates;
- political uncertainty is high in the short term in the US; and
- signs of a slowing in recovery momentum, particularly Europe.
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