The Short Squeeze: From turbulent markets to a surge in spending

If you want to know what to expect from the financial markets this week, but don’t have time to sift through the news to set yourself up for the trading week ahead, plug in to The Short Squeeze podcast. Hosted by editor of Markets Live on the SMH and The Age, Alex Druce, who is joined by IG market analyst, Kyle Rodda, it fills you in on everything you need to know about the latest in the world of financial markets.

This week, Kyle and Alex look at how the imminent US election will affect the global markets, as well as how Christmas retail is shaping up at home. Here’s what we can expect from the markets and the economy this week:

Volatility

The US election has been front and centre of investor’s minds for months now, and this week there’s a final anxious wait before the results are announced. The markets are positioning for a Biden win, but to stabilise the market and eliminate the volatility, two things need to happen, says Kyle. Biden needs an overwhelming victory that is announced immediately, and he needs to gain control of the Senate. This will eliminate any chance of a contested result, and also open the door to a big fiscal stimulus package from a Democrat controlled White House and congress - which could potentially be as much as $3 trillion. If these things happen, it’s likely markets will stabilise in America, and also follow suit in Australia. If events don’t unfold this way, then investors should get ready for a highly volatile period.

Retail boom

Christmas spending in Australia will start in earnest now Victoria has come out of lockdown, predicts retail reporter at The Age, Dom Powell. He suggests people are starting Christmas shopping early this year to avoid crowds and to ensure Australia Post delivers on time. There’s been a huge rise in online shopping since COVID-19 hit and this is expected to continue. Because many people have saved money over lockdown, there’ll be plenty of cash to splash, but shoppers shouldn’t expect bargains; retailers can’t afford to be offloading stock cheaply this year. While some retailers in suburban towns will fare well as Victoria’s lockdown lifts and restrictions ease across the rest of the country, those in the inner city won’t be as lucky. It’s believed foot traffic in inner city areas could be depressed for up to three years, leaving those retailers struggling to get people back in stores.

Rate cuts

As rate cuts from the RBA look inevitable, the market is waiting for this week’s meeting to see what hints the central bank might drop about future quantitative easing. Kyle suggests that small rate cuts will only provide minor relief to households and the bank’s willingness to extend credit, and that more will need to be done in order to support the Australian economy. The market is expecting a QE program in the near future, but until there’s an official announcement it will remain on tenterhooks, leaving a lingering uncertainty over the market.

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