|
|
|
|
Hedge Clippings | 02 August 2024 Central bankers love to use the term "a narrow path" as they manage their respective economies delicately between manageable growth, and the risk of recession. With the single tool of monetary policy to balance their twin objectives of inflation and employment, there's always the risk they move too quickly - or not quickly enough - and so miss the so called soft landing that the market craves. The US Fed looked as if they were on track to do that, but the market has become impatient. Just a day after Jerome Powell held rates steady but indicated they should be able to start easing in September, the ISM manufacturing index came in lower than expected, and at 46.8% indicating the economy was contracting. Suddenly the market's thinking bye-bye soft landing, hello possible recession. This couldn't come at a worse time for markets, particularly the NASDAQ and the Magnificent Seven, which were already seeing signs of a pull back from nosebleed valuation territory, coupled with concerns over reporting season - or at least missing analysts' estimates. Falls in the US of course lead to falls elsewhere, and Australia is no exception. To make matters worse the RBA has its own problems, although this week's CPI numbers have at least taken the pressure off them to raise rates at next week's meeting. Not that the CPI numbers were particularly good - June quarter up 1% and 3.8% over the past 12 months - they just weren't bad enough for the Board to raise rates on Tuesday as had been feared. One problem for the RBA is that Australia has a two speed economy - or at least two sections of the community that are faring very differently. At one end - say 20-25% - are doing it tough and struggling to make ends meet, and, as we hear continually, the government is doing everything it can to save, or at least support them - tax cuts, wage rises, energy and power support, etc. At the other end of the spectrum are those who have either paid off their mortgage, or at least paid it down to manageable levels, are comfortably retired, or are higher paid, and for whom inflation of 4%, and/or higher interest rates, aren't creating the same issue, partly because they're also beneficiaries of the government's generosity or stage 3 tax cuts. Of course there are those in the middle, and overall the average, who makes up the economy. It's the old conundrum: When your feet are in the freezer, and your head in the oven, your temperature is probably average. The next challenge for investors and fund managers reporting season in the US, and the ASX, where it runs through to the end of August. This is the period when Warren Buffett's famous quote "Only when the tide goes out do you discover who's been swimming naked..." comes into play. Missing market expectations - particularly when valuations are sky high - can result in savage sell offs. Overnight in the US Intel fell 17% after suspending its dividend, Snap also fell 17%, while Amazon fell 6% on disappointing quarterly sales and sales guidance in spite of net sales which are expected to grow by between 8% and 11% compared to Q3, 2023. Local hero, but NASDAQ listed Atlassian, fell 13% after close of trading, as its revenue projection is only for an increase of 16% this FY, having previously advised it would be 20% per year for 3 years. This week's edition of "The Last Word" covers all this and more. The Last Word In Episode 3 of "The Last Word", Chris Gosselin and Manny Anton delves into the latest market trends and economic developments. This episode covers key movements in the US, the impacts of recession fears on the US market, and the upended outlook for the US election following Joe Biden's withdrawal. News & Insights New Funds on FundMonitors.com Manager Insights | Argonaut Trip Insights: The US | 4D Infrastructure July 2024 Performance News Insync Global Capital Aware Fund |
|
|
If you'd like to receive Hedge Clippings direct to your inbox each Friday |
