Digital Finance Analytics (DFA) Blog – Page 79

The Ultimate Showdown In Context

This Tuesday, 17 January 2023 at 8pm, Senator Gerard Rennick and our own John Adams will be going head-to-head in a live debate on YouTube which will be shown on the Walk the World YouTube channel.This debate, dubbed the “Ultimate Showdown”, will be a clash of economic perspectives.

However, any debate about economics and the Australian economy in 2023 cannot occur without discussing the tumultuous events of the COVID-19 pandemic and how this pandemic was managed both from the stand-point of economic and health policy. Given this context, it is worth remembering what Adams said at the start of the pandemic.

On 11 April 2020, John Adams published a 6,000-word essay title “Australia has been economically destroyed in 4 weeks”. On 20 and 28 April, Adams and I recorded a two-part series on Adams’ analysis.In part 1, Adams explained why he was against lockdowns -a very unpopular view at the time.

In part 2, Adams explained why he was against the economic stimulus policies announced by the Morrison Government and the RBA in March 2020.In this IOTP repost – we will replay part 2 of this discussion ahead of the Rennick and Adams debate. Almost 3 years on, it is worth considering how correct or incorrect Adams has been and compare this to Rennick’s position which was very different at the time. What Adams said in April 2020 will be a key feature of Tuesday night’s upcoming debate.

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

http://www.martinnorth.com/

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

Seeing The Financial Wood Amongst The Trees…!

In this week’s market update we as always start in the US, cross to Europe, Asia and end in Australia. Markets have started to look through the recession fears it seems, banking on the Fed slowing its rake hikes, and reversing later in 2023.

Yet the signals are still mixed, and earnings are clearly under pressure in many market sectors. But it does seem to me to be a question about seeing the wood for the trees. The bigger trend on markets still is pointing lower, despite the short term moves higher. We are not, I think out of the woods yet… remembering Central Banks over nearly 20 years have tried to engineer growth through massive stimulation and debt, and economies have been distorted beyond belief. As support is removed, asset values are still over done, and the cost of debt rises.

The Dow cut losses to close higher Friday, as investors bought the early-day dip in banks following a string of better-than-expected results, though concerns about a weaker economy linger. In the end the S&P 500 and Nasdaq finished at their highest levels in a month on Friday, leaving the S&P 500 up 4.2% so far in 2023.

For the week, the S&P 500 gained 2.7% and the Dow rose 2%. The Nasdaq increased 4.8% in its biggest weekly percentage gain since Nov. 11. The CBOE Volatility index -Wall Street’s fear gauge -closed at a one-year low. The U.S. stock market will be closed Monday for the Martin Luther King Jr. Day holiday.

http://www.martinnorth.com/

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

Slower Rate Hikes After CPI? Maybe…

US CPI came out pretty much as expected, with headline rates falling, thanks to significant falls in gas (petrol) prices at the pumps, despite rises in food and shelter costs.

The markets lapped this up sending the indices mainly higher. along with gold, while bond yields and the US dollar slid.

However, Fed officials were out in force saying rates need to run higher for longer, so once again out of step with market expectations.

Next signal will be quarterly earnings from Friday. Still more volatility ahead.

http://www.martinnorth.com/

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

The House Standing Committee On Economics V’s The RBA!

An interesting report came out last December from the House Standing Committee On Economics, relating to the RBA and their recent questioning of Governor Lowe.

The report was a bit of a squib in that whilst it recognised some of the issues relating to monetary policy and interest rates, they skirted round the big issues of what caused the inflation in the first place, and the role of extended credit in inflating prices.

We discuss the report and its shortcomings.

http://www.martinnorth.com/

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

Inflation Is Still Alive And Well!

The latest monthly data from the ABS revealed that inflation at the top line and core both rose in November, despite changes to the weightings.

As a result, this puts more pressure on the RBA for at least a 25-basis point hike in the cash rate in early February. The markets are still expecting more rate rises ahead.

http://www.martinnorth.com/

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

Markets Betting Against The FED Again?

U.S. stocks ended up sharply on Wednesday, with the S&P 500 and NASDAQ gaining more than 1% each as investors were optimistic ahead of an inflation report that could give the Federal Reserve room to dial back on its aggressive interest rate hikes.

Investors are holding their breath in anticipation of Thursday morning’s Consumer Price Index inflation report —arguably the most important piece of economic data so far this year. There’s a lot riding on the outcome—if inflation keeps falling, that could support a market rally, while higher-than-expected inflation could send stocks plummeting.

After a stormy 2022, the Federal Reserve’s battle against inflation has become the chief preoccupation on Wall Street —with investors ascribing significant meaning to any economic data that could indicate what the Fed does next.

Recent data has been muddy. December’s hotly anticipated jobs report had something for everyone —easing wage growth and easing unemployment. Fed meeting minutes, released last week, also didn’t offer much in the way of conclusive answers.

That’s why this CPI report will command attention and go a long way toward shaping market expectations for the first Federal Reserve policy meeting of the year. The Fed Funds Futures market still sees a high probability of a quarter percentage point rate hike on February 1, but the results of the CPI report could change that.

Yet inflation swaps, transactions in which one investor agrees to swap fixed payments for floating payments tied to the inflation rate, are indicating that investors believe inflation will come down to 2.5% in the next seven months, even as the Fed’s own projections say inflation will remain well above 3% until 2024.

Bets that the Fed will soon pivot away from elevated interest rates, even as officials say that they won’t, could mean more market volatility lies ahead.

http://www.martinnorth.com/

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