Wins, losses and expectations
Eley Griffiths Group
Australia was a relative outperformer posting moderate gains compared to the retreats staged by major global equity markets in August.
The month began on a positive note with equities surging upward after the eagerly anticipated US Consumer Price Index (CPI) print announcement came in below expectations. The "risk on" exuberance was short lived after several U.S. Federal Reserve (Fed) voting members made headlines that a Fed pivot was unlikely and that further rate rises were needed to dampen inflation. Toward the end of August, the month's steadily accrued gains took a blow with the Fed Chairman's hawkish rhetoric at Jackson Hole confirming the Fed would continue its tightening policy until confident inflation is returned to target.
Overall, the domestic corporate reporting season scorecard shows result 'beats' trumped 'misses' verses expectations. Better than feared was bought, whereas downgrades were punished by the market. The season highlighted the deterioration effect higher than normal buffer inventories had on cash flow. Higher operational expenditure a consistent feature with both labour and material cost inflation. Finally, management outlook statements suggested that the consumer is still spending with no sign of slowdown yet.
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