Digital Finance Analytics (DFA) Blog – Page 81

Are You Feeling Wealthy Then? The Wages And Inflation Problem!

Stock markets are down, superannuation funds diminished, and property prices sliding as Chris Joye’s Latest missive shows. So, the answer to my question is probably no, unless you are a politician still receiving a generous pay rise, or a high-flying executive or you are working in high demand areas like information technology or finance, or perhaps construction. And those in the public sector are most likely to be saying no even louder.

The Australian Institute in November said that Australian workers are about to have twelve years of real wages growth wiped out in 3 years as the The Reserve Bank’s November Statement on Monetary Policy revealed just how badly Australian workers are being hit by the current weak growth in wages and fast rising inflation.

In August the Reserve Bank was anticipating that wages in the 12 months to December this year would rise at 3.0%. This has now been increased to 3.1%. That would suggest a better situation for workers, but unfortunately, the RBA has increased its estimate for inflation for the same period from the 7.8% it had in August to now 8.0%. That represents a real wage fall of 4.54% compared to its estimate in August of 4.45%.

All up the new estimates out to the end of 2024 suggest that real wages by December 2024 will be 2.2% lower than they were in June this year. That is again worse than the 1.8% fall estimated in August.

But comparing real wages from June this year misses out on the massive falls that have already occurred. By the end of 2024 the Reserve Bank now estimates that real wages will be some 5.4% below where they were in March 2020 just before the pandemic occurred.

It means that at the end of 2023 workers will on average only be able to buy the same amount of items and services with their wage as they were 15 years earlier in December 2008.

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Buckle Up! 2023’s Bumpy Ride Ahead…

At the end of the year, we can look back and pick over the coals of the old and look ahead to the new. But of course, it’s an artificial delineation, and the forces mustering at the end of the old year such as recession risk, rising interest rates in response to inflation, Ukraine and COIVD all are still in play.

Remember U.S. stocks just polished off their worst year since 2008 with a loss on Friday, bringing the year-to-date decline for the S&P 500 to 19.4%, its largest calendar-year drop since 2008. The only years where stocks fared worse were 2002, 1974 and 2008. The same holds true for the Dow Jones Industrial Average, which shed 8.8% this year, and the Nasdaq Composite, which lost 33.1%.

As previously high-flying megacap technology stocks and other interest-rate sensitive assets crumbled, value stocks outperformed this year, sending the Dow to its biggest calendar-year outperformance vs. the Nasdaq since 2000. The blue-chip gauge also recorded its biggest outperformance vs. the S&P 500 since the index’s creation. Energy stocks were a lone bright spot, as the S&P 500 energy sector recorded its best year on record with a 59% gain.

CONTENTS

0:00 Start
0:16 Introduction
0:30 Annual Performance
1:53 US$
2:50 Bonds And Stocks Fall
6:15 Oil
6:40 Gold
7:00 Bitcoin and Gold Compared
8:50 Europe and UK
11:09 China And COVID
11:35 Australia
13:22 Recession Scenarios
19:42 Factors To Consider
24:15 Regulating Crypto
26:04 Conclusion and Close

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Falling Into The Close Of The Year!

More weakness in markets as we close the year. The realisation of higher rates and recession risk hitting earnings is hitting home as big-tech takes another hit.

So we look at the market action and consider the signals ahead.

http://www.martinnorth.com/

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

Crypto: Into 2023 With Adam Stokes…

I caught up with Adam Stokes, for a review of 2022 and into 2023. The Crypto community took a number of body blows in the year, most notably the failure of FTX, against the backcloth of Central Bank Digital Currency pilots and calls for increased regulation.

And how does all this play into the need to control inflation, and for sound money? Where might 2023 take us?

https://www.youtube.com/@UC_LynnVoF0RJV6BjNJW26Ig

http://www.martinnorth.com/

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