Activity is likely to be muted in Asia today with the United States on holiday commemorating Veterans Day. It is also a partial holiday in Canada and parts of Europe. Price action overnight certainly reflected one eye on the door ahead of today’s holiday, with Wall Street equity markets continuing the old economy versus technology work from home rotation. The pace, however, was at a much calmer rate than the wild frenzy of the day before.

Today also marks the online shopping extravaganza known as Singles Day. Originating in China thanks to Alibaba, the rise of online shopping has allowed the rest of the world to engage in buying lots of stuff on a discount that we probably don’t really need. I have already purchased an armadillo grooming kit because it was 90% off and had free shipping to Jakarta. More worryingly, Mrs Halley is looking at shoes, claiming that jogging has made her feet bigger. I am expecting luxury goods and athleisure stocks to outperform today, and for Indonesia’s trade balance to take a hit.

Although the vaccine inspired sector rotation trade has calmed down overnight, there is likely to be life in it still going forward. Other vaccine manufacturers should start releasing their phase-3 results into the year-end. Results, positive or negative, are likely to spur renewed volatility in the rotation trade. Throw in Trump-induced surprises, no they haven’t gone away, and markets are unlikely to get quieter.

Asset prices globally remain well supported by monetary policy. What may change is the sectors that capital deploys in. That trend will continue into 2021, as no central bank in the world, except perhaps the PBOC, will be thinking of anything except ultra-easy.

New Zealand central bank maintains rates

The Reserve Bank of New Zealand confirmed as much today. Leaving rates unchanged at 0.25%, they noted the welcome vaccine developments but went ahead with their new funding facility for banks. The Funding for Lending Programme providing cheap funding for banks to lend to business. That form of quantitative easing is, in my opinion, far more sensible than the scattergun approach seen over the past decade, helping to avoid asset price distortions to some effect. The RBNZ also noted that preparations for negative interest rates continue; not the words of a respected central bank that thinks a world recovery is around the corner.

Although I continue to be bearish on the US dollar in 2021, if the US yield curve continues to steepen, I will have to mollify that outlook. Vaccines are unlikely to materially move the economic dial until mid-2021 at best. However, if they do arrive and can be distributed effectively, the heat will come off Federal Reserve Monetary policy. Monetary policy will remain lower for longer, and a bombed-out US government balance sheet along with a potentially hamstrung President Biden, means although I may be less bearish, bearish I shall remain for the dollar.