Economic Snapshot – August – September 2016

Economic Snapshot – August – September 2016

In summary

Financial markets were quieter in August than in previous months as Northern Hemisphere holidays reduced the volume of trading activity. Key economic data around the world did little to change the overall picture the markets have come to understand and expect. That is, the US economy continues to improve, but without sufficient strength to make a clear case for imminent interest rate increases. The government stimulus program in China is still showing up in some better than expected activity numbers, but this is not expected to last into 2017. In Australia, economic growth is holding up fairly well, led by the housing sector, while business investment and inflation remained muted. The UK economy is starting to show signs of the adverse impact of the Brexit vote, which led the Bank of England to ease monetary policy further in August. The Reserve Bank of Australia has been content to leave the cash rate at 1.5%. The US Federal Reserve has been try to soften the markets up for the possibility of higher-than-expected interest rates, but the mixed economic data have been undercutting their efforts.

Read the full article here

 

Read More
Economic Snapshot – July 2016

Economic Snapshot – July 2016

In Summary – a look at July 2016

The turbulence world financial markets unleashed by the surprise Brexit vote at the end of June quickly disappeared in July as it became apparent that any immediate negative impact would more than likelybe restricted to the UK. The issue of sorting out the actual exit has also been realised as a long term
programme meaning there’s no need to overreact.

What markets did do, is turn their attention back to the pace of economic growth and its implications for central bank policy. In general, the latest data show no signs of imminent recession in major key economies like the US and China. Equally there’s not enough US growth to clearly compel the Federal Reserve to lift interest rates in a hurry. Combined with expectations of further monetary stimulus in the UK, Europe and Japan, the markets were happy to resume buying both equities and government bonds.

After holding the cash rate steady in June, the Reserve Bank cut to a new record low of 1.5% on August 3rd. This came in the wake of the inflation report for the second quarter which, as expected, showedinflation remaining below the bottom of the Reserve Bank’s target range.

Read the full article …

Read More
Economic Snapshot – 2016 Review & 2017 Outlook

Economic Snapshot – 2016 Review & 2017 Outlook

In summary

In hindsight 2015/16 proved to be a volatile year of repeating mini crisis’. Despite the erratic political and economic news, we still enjoyed modest growth in most of the traditional main stream asset classes. This ended up coupling nicely with some surprisingly buoyant returns in bonds, small cap equities and listed property. Although this was an impossible task to foreshadow at the beginning of the year, diversification into what is traditionally the more volatile areas proved beneficial for investors.

Overall the year seemed to be full of new surprises, triggering bouts of volatility in equity markets and ever lower sovereign bond yields. It started with China’s devaluation in August 2015, shortly followed with OPEC’s decision to push the price of oil down to regain lost market share, and then extenuated with the Federal Reserve [Fed] in the USA generating on-off again messages about lifting interest rates. Finally, we had the surprising Brexit vote with the UK referendum deciding to withdraw from the European Union. Not surprisingly, this all undermined investors’ confidence in the global economy. However fears of imminent recession proved overdone as global growth slowed and resilience emerged in keeping with economic fundamentals. Some would say a victory for the economists.

In this very unusual environment investors continued to seek yield (Real Estate Investment Trusts and Infrastructure) while avoiding riskier growth assets (Emerging Markets). The US cash futures market ended the year pricing in no further move from the Fed for the better part of the next two years. Many commentators feel this is overly pessimistic and believe it’s likely that the Fed will have to take some cautious tightening steps in the coming year.

Read the full article

Read More
Economic Snapshot –   May – June 2016

Economic Snapshot – May – June 2016

In May we experienced an important realignment of interest rate expectations – both here in Australia and in the USA. Both countries are resisting a change of rates for differing reasons. There has been softer than expected inflation data in Australia leading to a holding strategy on rates whereas the USA had stronger than expected spending data – but is communicating concern about Britain leaving the European Union which in turn has led to a similar hold strategy. All things being equal and assuming Britain remain in Europe the USA is more likely to increase rates. We live in interesting times?

In Australia, the market priced another cut in the cash rate, while in the USA the market brought its short-term expectations for the cash rate more into line with the Federal Reserve’s guidance. These changes in the market’s expectations about interest rates contributed to a modest but renewed depreciation of the $A – which continues to show resilience upside strength beyond expectations.

Australia

 Economic data for Australia released in May prompted further expectations of lower domestic interest rates. For example, the latest wage price index figures showed hourly rates of pay grew by a mere 0.4% in the March quarter and by 2.1% over the past 12 months. This was the lowest reading in the last 20 years. Economists have noted that this pace of wage inflation is lower than history suggests it should be given where the unemployment rate is at the moment.

Download the Snapshot to read more

 Ident-Nr.AuthorPublisherCopyrightLicense
84797534bigstockbigstock© bigstock - 84797534 - http://www.bigstock.comRoyalty-free
Read More
Economic Snapshot for March – April 2016

Economic Snapshot for March – April 2016

Portfolios in March saw further improvement in global investor sentiment as fears of a recession faded due to better news on key economic data and some stability returning to the oil market. Equities recorded a positive return for the month, with emerging equity markets outperforming particularly well after their recent difficult months. The normal monthly graph looks significantly different to the 3 month equivalent for the first quarter of the year and as such we have included the latter for a better perspective. US equities for example have now achieved a moderate return of 1.18% for the quarter but this is due to a strong rebound of over 6% in March. This is a poignant reminder that when we take into account a minimum 5 year time horizon the graphs are merely snapshots of a point in time.
In the US, there were further signs of labour market strength and some welcome improvement in the pace of manufacturing activity. Core inflation also continued to edge higher. However, the Federal Reserve again reiterated its preference to move cautiously with further interest rate increases. This inevitably undermined the US$ and resulted in speculative trading and volatility.

There were also encouraging signs of improving economic conditions in China, with the manufacturing index rising to its best level since June 2014. This reflects the impact of further monetary and fiscal stimulus from the Chinese authorities in recent months.

Download the Economic Snapshot here

Read More

SIGN UP

For our free e-newsletter

TAKE A HEALTH CHECK

For our free e-newsletter

Personal