Wealth Management – Page 5 – Digital Finance Analytics (DFA) Blog

Operation Ricochet!

The latest edition of our finance and property news digest with a distinctively Australian flavour.

Ricochet is defined as a glancing rebound (as of a projectile off a flat surface). And in the markets, we are seeing that in spades at the moment.

So, in this week’s market review we will as normal start in the US, cross to Europe and Asia and end in Australia. But I want to stress how volatile things are, in a situation where good news is bad news, expectations of a recession or slow down are growing, and Central Banks are still generally talking interest rates higher.

Plus, as I discussed yesterday, there is a growing divergence between the RBA’s approach compared with other Central Banks, to the point where we risk higher rates for longer in a slowingeconomy, which is exposed not only to exchange rate risks, but also a slowing China.

The Dow gained Friday as investors mulled a mixed jobs report and speculation about China easing Covid-19 lockdown measures, but that wasn’t enough to prevent the marketfrom snapping a three-week win streak following the Fed’s rate hike this week.In fact, global shares rose on Friday and the U.S. dollar fell, after jobs data came in stronger than expected but also hinted at some slack in the tight American labor market,triggering again that hope that the Federal Reserve might ease up on monetary tightening –despite what was said just a day earlier about higher rates.

Data from the U.S. Bureau of Labor Statistics showed the economy generated 261,000 jobs in October. That was higher than an estimate of 200,000expected but it also showed unemployment rising to 3.7% from 3.5% in September while wage inflation dropped to 4.7% from 5% in the prior month.Average hourly earnings increased 0.4% after rising 0.3% in September, but the rise in wages slowed to 4.7% year-on-year in October after advancing 5.0% in September.The participation rate eased back a little to 62.2%.The stronger jobs report comes just ahead of fresh inflation data next week, which if continues to show inflation running hot would lift the prospect of another 75 basis point hike next month.

In Australia. Afterpay-owner Block led the Australian sharemarket higher on Friday after reporting a stronger-than-expected third quarter profit, causing its share price to leap 10.9 per cent to $97.03.

The S&P/ASX 200 added 0.5 per cent, or 34.6 points, to 6892.5 on Friday, lifting its weekly gain to 1.6 per cent. The broader All Ordinaries index added 0.6 per cent to 7089.3 on Friday.

Go to the Walk The World Universe at https://walktheworld.com.au/

Is The Tech Bloodbath Really Over?

On Friday there was a robust, broad-based rally across Wall Street as markets looked over more encouraging economic data and a sunnier earnings outlook. This despite the upcoming Federal Reserve policy meeting next week. The FOMC decision is widely expecting a unanimous vote for at least one last major rate increase, though with the Fed’s preferred price measure still showing inflation is running hot, that might make it harder for them to set up a possible downshift in its rate-hike pace for the December meeting.

That said, despite data on Thursday showed a strong rebound in U.S. gross domestic product (GDP) in the third quarter, demonstrating resilience in the world’s largest economy and oil consumer and an acceleration with inflation, strong consumer spending data, and a robust labor market, much of Wall Street is growing confident that the Fed will pause tightening once they take the funds rate to 4.50-4.75% next quarter to the point where Financial markets have now priced in an 84.5% likelihood of a fifth consecutive 75 basis point interest rate hike at the conclusion of the Fed’s Nov. 1-2 policy meeting, and a 51.4% chance the central bank will decelerate to 50 basis points in December.

In addition to the FOMC decision, traders will also closely monitor the nonfarm payroll report. The strong labor market is still expected to show job growth with 200,000 jobs created in October, down from the 263,000 created in the prior month. The unemployment rate is expected to tick higher and wage gains are expected to slow.

So all major U.S. indexes ended the session up about 2.5% or more, with the S&P and the NASDAQ notching their second straight weekly gains. The blue-chip Dow posted its fourth consecutive Friday-to-Friday advance and its biggest weekly percentage gain since May. As a result, the bulls were back, even if largely driven by hopium (remembering the bulk of economists are still seeing a US recession likely next year!)

“This has been one of the best months (so far) in the history of the Dow, suggesting the bear market likely ended,” said Ryan Detrick, chief market strategist at Carson Group. “Big monthly moves historically happen at the end of bear markets.” “This is the second Friday in a row we’ve seen aggressive buying suggesting investors are growing more comfortable holding over the weekend,” Detrick added.

Go to the Walk The World Universe at https://walktheworld.com.au/

ASIC’s Time Has Come…

News flash: Liberal Senator Andrew Bragg has given notice of a motion for a major inquiry into ASIC, which will be voted on tomorrow (Thursday). Labor currently opposes the inquiry, and the Greens haven’t taken a position yet.

Urgent: Call – today – the ALP and Greens Senators on the Economics References Committee to tell them they must support an inquiry. See their contact details below.

Whatever Senator Bragg’s motives, a major inquiry into ASIC is VERY important, as this will be the first specific, detailed, inquiry into ASIC since the 2018 Banking Royal Commission laid bare its many failures. And the Adams Report into ASIC’s very low rate of investigations – just 0.74% of all complaints – shows that it’s performance hasn’t improved.

An example of ASIC’s failure is Sterling First, which has left the lives of the elderly tenants ruined.

Below is the text of Senator Bragg’s motion:

Chair of the Economics References Committee (Senator Bragg): To move—

That the following matter be referred to the Economics References Committee for inquiry and report by the last sitting day in June 2024: (This will be a long, detailed inquiry.)

The capacity and capability of the Australian Securities and Investments Commission to undertake proportionate investigation and enforcement action arising from reports of alleged misconduct, with particular reference to:
(a) the potential for dispute resolution and compensation schemes to distort efficient market outcomes and regulatory action;
(b) the balance in policy settings that deliver an efficient market but also effectively deter poor behaviour;
(c) whether ASIC is meeting the expectations of government, business and the community with respect to regulatory action and enforcement;
(d) the range and use of various regulatory tools and their effectiveness in contributing to good market outcomes;
(e) the offences from which penalties can be considered and the nature of liability in these offences;
(f) the resourcing allocated to ensure investigations and enforcement action progresses in a timely manner;
(g) opportunities to reduce duplicative regulation; and
(h) any other related matters.

The Senators to call are:

Senator Nick McKim Greens:
02 6277 3601 senator.mckim@aph.gov.au

Senator David Shoebridge Greens:
02 6277 3169 senator.shoebridge@aph.gov.au

Senator Jess Walsh ALP:
02 6277 3744 senator.walsh@aph.gov.au

Senator Jana Stewart ALP:
02 6277 3004 senator.stewart@aph.gov.au