We look at the latest from our surveys ahead of our live show on Tuesday 11th March, where we deep dive on post code analysis.
Despite the political spin, many households are caught in a cash flow crisis, thanks to rising prices, interest rates and frozen tax bands which means that despite of some small income growth (not for all though) households are exposed to cash flow pressures.
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This is our weekly market update, where we start in the US, cross to Europe and Asia and end in Australia, covering crypto and commodities along the way. As expected, markets continue to wrestle with mega levels of uncertainty, largely driven by US President Trump as Investors are grappling with dramatic policy change around the world. Trump’s back-and-forth implementation of fresh tariffs on Mexico, Canada and China exacerbated broad concerns about the economy. In another U-turn, Trump decided to exempt products covered by the 2018 United States-Mexico-Canada Agreement (USMCA) from the recent imposition of 25% tariffs until April 2. “The new U.S. Administration’s highly uncertain tariff policy looks to be damaging confidence and impacting activity,” said analysts at ING, in a note.
Under the new Trump administration, the barrage of initiatives on trade and other issues, such as federal workforce cuts, has fed uncertainty for businesses and consumers. Market unease is also rising. The Volatility index jumped this week and was around its highest level since late last year and up 41% compared with the start of the year. “Volatility is here to stay for a while because we do not have economic and trade policy certainty,” said Irene Tunkel, chief U.S. equity strategist at BCA Research.
Markets were also shaken by Germany’s surprise spending plans, which drove a selloff in the benchmark German Bund. The German 10 year rose by 19% over the past week, to 2.835. Beyond that, deep questions about the future of NATO, and Ukraine have forced European nations to reset their defence spending.
Stocks swung wildly on Friday, with the S&P 500 little changed in afternoon trade. Major indexes cut losses following mid-day comments from Federal Reserve Chair Jerome Powell, who told an economic forum that the economy “continues to be in a good place.” Despite that the benchmark S&P 500 marked its worst week in six months. Its down more than 4% from a month ago. The tech-heavy NASDAQ Composite on Thursday ended down more than 10% from its December all-time closing high, confirming it has been in a correction for several months. The Dow is also off highs from last year down more than 3%.
The Global MSCI index rose 0.2% on Friday and was down 1.26% across the week and saw a decline of 5% since its record high on February 18. In contrast the European STOXX 600 was down 0.46% on Friday, and 0.69% from Monday but is still up 9% year to date. But the Australian ASX 200 fell 1.81% on Friday and was down 2.74% across the week and down more than 6% over the past month.
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The price of Bitcoin and other cryptocurrencies continue to whiplash in response to more news from the While House about the so call Strategic crypto reserve. Trump had vowed to create a strategic Bitcoin reserve on the campaign trail, one of many crypto-related promises that helped fuel a surge in prices up until the day of his inauguration. Trump’s campaign pledge to create a strategic Bitcoin reserve was one of many promises designed to appeal to an industry that has emerged as source of significant political donations.
On March 6th President Donald Trump has signed the long-awaited order creating a strategic Bitcoin reserve and an additional stockpile of other digital assets. The order, was shared initially as a post on X by White House crypto czar David Sacks, indicated that the government wouldn’t use taxpayer money to fund a strategic reserve of the largest digital asset.
“The Reserve will be capitalized with Bitcoin owned by the federal government that was forfeited as part of criminal or civil asset forfeiture proceedings. This means it will not cost taxpayers a dime.”
The government holds about 200,000 Bitcoins seized over the past 15 years. That’s worth $17.5bn at today’s prices, with Trump’s order also calling for an audit of the government’s crypto holdings. The Department of Justice- which holds all the government’s seized Bitcoin- was seen selling the token intermittently on the open market in recent years.
This was a disappointment to many who had taken positions ahead of the announcement on the assumption that the Treasury would purchase additional crypto holdings. With this latest development, these positions are being unwound. While the creation of the Bitcoin-specific reserve fulfills a promise Trump made on the campaign trail, the details fell short of industry expectations.
To me this looks more like lipstick on a pig than a big strategic shift. But this was not what the pro-crypto community had been banking on.
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The DFA surveys have been tracking the rising pressure on households, thanks to rising pressures from costs of living inflation, higher mortgage and rental payments, and static or falling real incomes, which are not expected to catch up with past peaks for years. Our latest release to end February 2025 is out, and I will make a show on this shortly, as well as cover the post code level analysis in next Tuesdays live stream. https://youtu.be/FUmpN6eKjsM
One of the points in our analysis is the rising levels of financial pressure for some households, while others are doing just fine, thanks you, with net wealth rising from home price growth, and investments thanks to stock market rises. Roughly one in three households are in financial clover, a third are hanging on just, but a third are continuing to fall behind, and getting into deeper financial do do.
But now the mother of all household surveys, the Household, Income and Labour Dynamics in Australia (HILDA) Survey was released today. They reported that financial inequality in Australia is at its highest since 2001 just a young people find themselves shut out of the housing market. The report says there was a fall in home ownership between 2002 and 2018, but home debt across all households rose in a “sustained fashion” regardless.
And things are getting harder for single parents, who have seen a 76% increase in childcare costs per child since 2006 and more than half (51.2%) of respondents said their real income decreased between 2021 and 2022.
They now have released their 19th annual report with data from 2001 to 2022 called wave 22. Wait, you say. Surely, we are in 2025, so is this really that relevant? This is indeed one of my bug-bears about the HILDA reports, they are so lagged as to be seriously misleading.
But all up, the HILDA data does confirm the trends in our surveys, but the true impact won’t be seen until future releases of their surveys. But ahead of the upcoming election, it is important to recognise the rising disparity between those households under financial pressure and the rest of the community. Unfortunately politicians tend to be in the doing well category, (from property portfolio or other investments), not to mention any specific member, nudge nudge wink wink…
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I am pleased to report Edwin is back, for a belated rant on Wednesday this week. We discuss the latest economic update, as the economy continues to be supported by Government spending, the latest moves on home prices, the question of “green” bank loans, and lots more.
The tip of the week was especially relevant!
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This is an edited version of a live discussion with Head of Investments at Walk The World Funds and Nucleus Wealth, Damien Klassen as we consider whether stagflation is a potential outcome from recent policy changes in the US, and how global markets are facing into the greater levels of uncertainty. How do we separate signal from noise, when considering an investment strategy.
You can ask a question live.
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In this show I look at the latest home price trends, and other data which is showing the pressure of houses and businesses. Prices may be on the turn, but affordability is still a critical issue.
Edwin, our property insider was absent today, hope he will be well enough for a return later in the week, but we will see…
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In today’s show I want to delve into three important issues, which I do not think the mainstream media gave sufficient weight and consideration to.
The first relates to the market interest rate assumptions which drives the RBA models, the second concerns the use of cash and the impending upending of current arrangements in July, and the third, the question of the fate of Australia’s Gold, and what is happening to physical Gold more broadly. For each I will add my own analysis.
So as always, as questions are asked and answered, actually more questions are raised. But to me these three questions, the link between Bank modelling and market assumptions on interest rates, the use and availability of cash, and the physical gold market, are all ones to watch.
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This is our weekly market update where we start in the US, cross to Europe and Asia and end in Australia, covering commodities and crypto along the way.
When UK Prime Minister Harold Macmillan was asked what was the greatest challenge for a statesman, he replied: ‘events, dear boy, events’.
This is highly relevant to this week’s market review, because they were whipsawed through the trading day asking what is a negotiating gambit and what is a serious policy proposal. After opening higher, they sank mid-session during a public berating of Ukrainian President Zelensky by President Trump and Vice President Vance at the White House. Zelensky is “not ready for Peace if America is involved,” Trump said in a post on Truth Social afterwards.
But, US investors shook off the volatility through mid-afternoon and then pushed still higher leading into the closing bell so that all three US benchmarks rallied, with financials leading all 11 of the S&P 500 industry sectors higher. As a result, The S&P 500 climbed 1.59% The NASDAQ gained 1.63%, while the Dow Jones Industrial Average rose 1.39%. The CBOE Volatility Index, which measures the implied volatility of S&P 500 options, was down 7.10% to 19.63.
Across the week, the Dow was up 0.95%, the S&P 500 was down 0.98% and the NASDAQ was down 3.47%. Both NVIDIA and Tesla rallied to finish the week, rising 4 per cent and 3.9 per cent respectively, but were still down 7% and 13% for the week. Shares of NVIDIA which reported earnings late Wednesday, swung to losses as investors focused on signs of increased AI spending in the industry.
The MSCI global index was up 0.66% on Friday, but still down 1.33% for the week, while the STOXX 600 European index was up another 0.6% across the week after touching a record high on Wednesday. Australia’s ASX 200 rounded off earnings season on a negative note, slipping 1.2 per cent, to post its second consecutive month of losses, tumbling 4.2 per cent in February wiping out all gains this year.
The level of uncertainly across markets is reaching fever pitch, and we can expect to see more volatility as the world order is shifting under our feet. On Tuesday I will be discussing the implications for investors with Damien Klassen from Nucleus Wealth on my live show. One not to miss!
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We look at the weird two-facing issues of credit growth, which is rising faster than inflation, and real disposable income which is still under pressure, and lower than some years ago. It is not expected to recover any time soon.
Latest data reinforces the pressure on wages, which means more households are leveraging up, despite aggregate data which according to the RBA is pointing somewhere different. So today we explore this conundrum.
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