No one likes lockdown just as we hate taking bitter medicine but in the interim lockdown is here to stay , at least in Australia. For some time yet in NSW and periodically across many other states in on-off fashion, because National Cabinet has announced that it takes 70pc vaccination rate before freedom starts and 80pc before normality returns. That is at least 6 months away. Employer Group AI Group also suggested to brace for 6 months of lockdowns.
Notice that subsequent to that announcement, the Aussie tumbled from its brief encounter with 74c back to 73.4c. A lower Aussie dollar is Risk Off. It now reflects the state of mood internationally amidst uncertainty and the penciled in certainty that lockdown is here to stay for a longer period yet.
But here is what Dr Grenfell said
Reaching 80pc vax rate will be ‘a Herculean task’: expertIn an interview on Weekend Breakfast, Dr Rob Grenfell, director of health and biosecurity at CSIRO, had this to say about the vaccination targets set by the federal government:
“To achieve an 80 per cent is going to be a Herculean task.”
It will be a Herculean task if we continue to have mixed messaging about vaccines. Vaccine hesitancy comes from two groups, one based on concerns over adverse effects of the vaccine and the other from ideology. The first can be addressed through improved communication at the community level. As for the second, they yearn for freedom but won't be the ones to move the vaccine needle to the required 80pc to reach freedom for all. So the ball is in the court of these two campers to change their mindset because vaccines would be available soon and hopefully in sufficient quantities.
Lockdowns will strangle the economy , I get that, but what we need is tough action to get us out of protracted lockdown so the economy can breathe. If NSW continues on with protracted lockdown, we could fall into double dip recession and the struggling AUD is signalling that is a reasonable chance prospect.
Plus a protracted lockdown will be bad for the economy and in turn bad for the markets. ASX stock market performance will stall over the next 6 months because of lockdown uncertainties. Now it would be up to the State Premiers to turn the lockdown dial down.
But a lockdown threat is not just domestic, it is also looming in the US with the Biden administration hinting on prospect of getting lockdown back.
Watch two charts below to figure out if the prospect is becoming more real
First is Delta Airlines..airlines are the hardest hit with lockdowns. We are starting to see semblance of a breakdown.
Second is Alpha Pro Tech (APT) which makes masks, hazmat suits, shields and other infection control apparel, we can see it breaking up from its downward trend.
Given the above likely at least 6 month macro environment, risk reward stacks against involvement in Aussie stocks . When that is stacked up with the risk of highly elevated US stock market, we may get an ASX that is capped in performance despite a better Wall St but equally crashing down when Wall St finally dives/correct.
IMO time for a paperless move, into physical Gold. AUD Gold holding well despite Gold losing its recent shine (no thanks to a resurging BTC) but a weaker AUD saves the day. Physical AUD Gold won't make much money but in a world where choices are limited (cash consumed by inflation and stocks near their end game) , it is IMO a good bet both medium and long term. After all, greater world uncertainty=better Gold price and lockdowns=lower AUD , great hedge.
