My take on the Current Market Correction

Hello fellow Hotcopper traders!

Once again - DO NOT BE UNHAPPY with the current market selloff. Shares is supposed to PRODUCE happiness ie by giving us more money in the future. DO NOT FEEL DOWN - be happy and don't feel in despair!

Previously if you remember my analysis for the commodities correction a month back, my analysis on the court decision, annual reports, PDF etc, I'm going to again give my take on the current market correction.

First some basic events which led to this:

1. FOMC Federal Reserve is meeting this Tuesday / Wednesday US time.
2. US House / Senate in stalemate over $3.5T Green New Deal and holding the $1.5T Infrastructure Bill "hostage"
3. Fears of Evergrande collapsing causing another Lehman Brother's moment.
4. COVID getting rampant in the US.
5. Sept 18 was a Trump rally
6. AUKUS is good for the long term for LYC but temporaily causing unease amongst shareholders. Likewise China's CTPP ambitions and France's withdrawal + Canada's election.
7. Constant market consensus for a "5-10%" market correction this month.
8. US debt ceiling's deadline fast approaching.
9. Iron Ore once again has dramatically dropped shedding FMG, BHP's SP.
10. Constant threat of the $3.5T bill causing a rise in company tax to 26.5% (from 21%) causing EPS to drop.

Clearly I don't see any good news sadly FOR NOW! What's left in stall for the market?

1. 95% Federal Reserve will NOT taper / raise IR. Clearly with COVID running rampant, unemployment higher than expected and inflation much lower (5.3% vs 5.4% expectation vs 5.5% last monty (ie clearly transitory), the Fed will not taper nor raise IR. That'll be madness. However the Fed might start preparing for a early 2022 taper.
2. 75% $3.5T Bill will pass. Joe Manchin did say maybe a cut to $1.5T was doable for him. Possibly a compromise of $2T is possible. Dems will most likely focus on non controversial parts of the bill - ie raising the corporate tax rate to NOT 26.5% but rather 25% from 21%. This is in line with the recent deal signed by world leaders for a 25% rate. https://apnews.com/article/joe-biden-business-bills-nancy-pelosi-joe-manchin-9f948c2604fbcf9af5f0be6868424ef6
3. 80% Evergrande will NOT collapse. Evergrande is still functioning as of yet, just it most likely cannot pay it's interest repayments by the end of this week. China clearly does not want to be blamed for another financial meltdown, since China's wolf warrior diplomacy favours "face". They will most likely restructure Evergrande's debts, cut down and lay off staff (or relocate staff), cause China's banks to write it off as bad debt, and "quietly" fix the problem. China will try as much as possible to NOT do QE - since people will call China hypocritical since China said QE is bad. Evergrande is due around $140M in interest repayments this week and next. The question is if Evergrande's recent keep 50% fire sales can raise enough liquidity. Regulators have already begun telling banks and creditors to "delay" deadlines for payments, so we'll have to wait and see. The fundamental issue is China has strict property laws - so commoners will have a hard time buying in Evergrande's fire sale. Will foreigners invest? Will foreigners "buy" Evergrande? (unlikely). In all honesty, Evergrande's debts will have to be delayed payment and restructured. Banks will most likely "lend" Evergande money to pay foreign obligations. https://www.globaltimes.cn/page/202109/1234646.shtml https://www.wsj.com/market-data/quotes/HK/3333/financials https://www.aljazeera.com/economy/2021/9/20/chinas-evergrandes-shares-pumelled-on-fear-of-debt-default
4. 95% US has reached COVID peak. Hosptialisations have already started going down. Cases have stabilised.
5. 100% Sept 18 flopped. A non event....
6. 70% AUKUS is good for the long term. It might cause long term damage to geopolitical issues, but is fantastic for Lynas!! China's bid into the CTPP is SOOOO GOODD! WHY? Clearly Biden during the next Quad meeting will rejoin CTPP! Aus + US will 100% flesh things out with France. France is having their own eletion so that's why.
7. 75% Correction is temporary. If the next 2 weeks are full of good news - ie Evergrande disaster averted, US agrees on the Infra bill + the Fed will not taper - it's all good!
8. 80% Debt ceiling will NOT cause a government shutdown. Dems have control of the house and senate. They will 100% delay the debt ceiling issue until the $3.5T bill is first solved.
9. 100% Commodites selloff "fake" impacted green stocks. Once again, computerized models and investors are confused that "old" commodities ARE NOT GREEN COMMODITIES!!! With China slowing economic growth due to wanting "equality for all", they don't want more construction (ie Evergrande). Lockdowns are also hurting.
10. 90% House bill will cause EPS to drop.This is true, but to much less of an impact to green stocks! This is because subsidies are in place!

On future good important events:

1. Climate Change conference COP21
2. QUAD Meeting
3. G20 Meeting
4. Neodymium tariff / subsidies
5. Lynas DOD update
6. UN's further climate reports
7. Biden most likely entering CTPP and excluding China
8. $3.5T and $1.5T Infrastructure bill
9. Neodymium metal and ore prices seem to be doing well!