Aus macro

Data prints

Vaccine passport or not, in sight, I find it hard to reconcile certain sectoral valuations with the PMI data (including the August prelims).


The same points hold for the retail data out today, which fell -3.1% over the past year, on a seasonally adjusted basis.


With the month on month data down -2.65%.


Whilst our thoughts here focus more fully on the consumer discretionary / retail sales (NCK, JBH, HVN, DSK, GUD, BRG, APE) the same considerations extend market wide, where a considerable amount of enthusiasm for shares is difficult to reconcile with the actual economic outlook.

It’s quite clear that we will get vax “passports”, a situation where you can show your vaccinated status, and you can go and do stuff that the unvaxxed can’t, e.g. to go to work (as teachers, aged care workers, and now Qantas employees require) but also more general things like eat in a restaurant, see a movie, get a haircut and the like.

The expectation of vaccine passports is why all the travel, leisure, gaming, and tourism stocks have gone bananas over the past few days, despite the worsening in daily case rates. They are no longer looking at, or caring about, the flow of new cases, but rather the end game of a vaccinated cohort with freedom of movement.

However, the part that’s harder to parse, is as follows.

Suppose we get to our desired vax status (e.g. c70% ore more) at which point we open up. However, Delta is so contagious, that we (plausibly) see our case rates moves into the 10’s of thousands. Our death rates will be low, but in that scenario it is hard to predict how consumers react.

Our approach, within direct equities, has been to have some COVID beneficiaries, and unsurprisingly, to have a mix of COVID recovery plays, but crucially to ensure that we’ve got plenty of QGARP (Quality Growth at a Reasonable Price) to help us weather whatever happens.

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