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Hedge Clippings | 22 November 2024 Following the build up, media frenzy and speculation leading to the US election, and then the surprise at Donald Trump's resounding victory (except to The Donald himself), everything has gone quiet, relatively speaking. Maybe it's just the media in limbo, save for regular announcements regarding key appointments. Trump himself, rarely short of a word over the past 6 months, has also gone quiet. Either he's taking a break prior to taking over in January, or maybe he's back on the golf course? Maybe it's just the lull before the storm? There's plenty of speculation on policy implementation, but even more on the reaction from China on tariffs, or immigration, or ending wars "in a day". Back in Australia the government is softening us up prior to the election due by May next year, which according to the polls is going to be much closer than one would have imagined after the last election. Much will come down to the economy (as it did in the end in the US) with inflation and interest rates taking centre stage. Treasurer Chalmers is trying to put a good spin on inflation, but is unlikely to fool anyone, and certainly not the RBA or the market. A big test will come next Wednesday when monthly CPI numbers are due for October. While the headline rate for the September Quarter seemed to be on the right track at 2.8%, that was significantly affected thanks to electricity rebates and lower fuel prices. Underlying inflation remained high at 3.5% which the RBA Bulletin noted was falling more slowly, and was not expected to return to target until the end of 2026 - in fact, the RBA expects that it will pick up in the September quarter 2025 when the energy rebates are due to end. Added to this, as noted in PinPoint Macro Analytics' weekly macro research (see below), the latest inflation figures in four major economies (US, UK, Eurozone and Canada) which had been falling, have all picked up. If Australia's CPI follows suit next week, then the chance of the RBA helping the embattled Albanese government out with a rate cut pre-election slips further. As PinPoint's Richard Grace points out, "the overnight index swap (OIS) market is the purest form of the market's expectation for what the RBA may do, and it is finally starting to push out the timing of the next interest rate cut." PinPoint also warns that the RBA Board has also said it is not ruling anything in or out. That might mean no rate cuts until after the election, or as an outside option, maybe a rate rise. That would certainly cook Albo's goose! News & Insights Manager Insights | East Coast Capital Management Hedge Clippings - Macro Research | PinPoint Macro Analytics US Election 2024: How will markets and sectors respond? | Magellan Asset Management Market Commentary - October | Glenmore Asset Management October 2024 Performance News Argonaut Natural Resources Fund Skerryvore Global Emerging Markets All-Cap Equity Fund Bennelong Long Short Equity Fund |
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