Latest from the markets continue to show weakness, and the latest came from the IMF which will down forecast growth – and recession is a rising risk. We are ships in choppy waters… We are in a world of more fragility.
And more from Fed member saying rates must continue to rise.
Markets still need to digest this downside news.
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Today’s post is brought to you by Ribbon Property Consultants.
The RBA released their Financial Stability Report today and provided a worrying insight into household finances. Rate rises and large mortgages are having an impact, plus pressure on builders is rising.
We look at some of their analysis.
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I discuss the latest rate moves with Steve from Canstar. Steve Mickenbecker is in Canstar’s Group Executive Team, bringing more than 30 years of experience in the Australian financial services industry. As a financial commentator for Canstar, Steve enjoys sharing his expertise across topics such as home loans, superannuation, insurance, mortgages, banking, credit cards, investment, budgeting, money management and more. https://www.canstar.com.au/team-members/steve-mickenbecker/ Go to the Walk The World Universe at https://walktheworld.com.au/
Digital Finance Analytics (DFA) Blog
Wither Rates Now? With Steve Mickenbecker [Podcast]
In today’s market update we look at the ongoing volatility hitting the markets at the moment – as part of the October Effect. Wall Street stocks closed lower on Wednesday, unable to sustain a late-day surge, after data showing strong U.S. labor demand again suggested the Federal Reserve will keep interest rates higher for longer. And the Russian directed Opec + confirmed a formal reduction in Oil production to try to keep prices high.
And A fifth consecutive 50-basis-point rate hike from the Reserve Bank of New Zealand (RBNZ) on Wednesday reminded investors that inflation remains the main focus of central banks. The New Zealand dollar was last up 0.14% at $0.5744, having jumped as much as 1.3% earlier in the session. The Aussie dollar was last up 0.12% near flat at $0.6494.
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Today’s post is brought to you by Ribbon Property Consultants.
The Markets are starting to believe Central Banks are going to blink – as we saw yesterday when the RBA lift the cash rate by a less than expected 0.25% – though as I said one smaller rate rise does not a pivot make.
The S&P 500 index posted its biggest single-day rally in two years on Tuesday after softer U.S. economic data and Australia’s smaller-than-expected interest rate hike stirred hope for less aggressive tightening by the Federal Reserve.
The RBA is the first major central bank to recognize that now is the time to slow down after aggressively raising rates this year, said Anthony Saglimbene, chief market strategist at Ameriprise Financial. “There’s hope that the Federal Reserve at some point in the fourth quarter will say the same thing. Not stop raising interest rates, but just slow the pace,” he said. “That’s what the market’s kind of rallying on below the surface.”
Still, Fed Governor Philip Jefferson said inflation is the most serious problem facing the U.S. central bank and it “may take some time” to address. San Francisco Fed President Mary Daly said the central bank needs to deliver more rate hikes.
Overnight, the US Labor Department in its Job Openings and Labor Turnover Survey, or JOLTS showed vacancies remained above 10 million for the 14th straight month. Layoffs also stayed low, signs of a still-tight labor market, which likely keep the Federal Reserve on its aggressive monetary policy tightening path.
“Even as higher interest rates and inflation, and weaker business and consumer confidence are beginning to tamp down labor market activity, the labor market still remains healthy,” said Sophia Koropeckyj, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “We expect that the Fed is not yet ready to pause.”
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Today’s post is brought to you by Ribbon Property Consultants.
I discuss the recent RBA rate change with Peter from Mozo. What is happening to mortgage and savings rates and what may happen next?
Peter Marshall has been working in the Australian banking and finance industry for over 20 years and oversees Mozo’s extensive product database. He is regularly sought out for his expert commentary and analysis on banking and interest rates trends by print, radio and TV media.
The Reserve Bank of NZ lifted the cash rate another 0.5% to tackle inflation – and is taking a different tack to the RBA, where home prices are falling faster. Expect high rates and more falls ahead, in both countries.
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After the rout of September, sorry to break this to you, but stock markets historically have experienced well-above-average volatility in October. It’s often a spooky month for stocks and several of the greatest crashes in stock market history have occurred during the month, including ‘Black Tuesday’ and ‘Black Thursday’ in 1929, as well as ‘Black Monday’ in 1987 and the worst of the 2008 financial crisis meltdown. Some have dubbed this the ‘October Effect’.
Guggenheim Securities Chief Investment Officer Scott Minerd said that he expects stocks to fall another 20% by mid-October, citing a connection between price-to-earnings ratios and inflation. “We should see stocks fall another 20% by mid-October…if historical seasonals mean anything,” Minerd said in a tweet.
The Fed has already raised its benchmark interest rate by 300 basis points this year as it fights to bring inflation back under control. And more hikes are expected. We will get more data of course, during the month, but one to watch is the feedback loop between U.S. stocks and bonds.
With the S&P 500 is down more than 20% on the year and showing no signs of hitting a floor, remember the valuation for the index remains elevated, and earnings estimates have only started to turn lower and may fall further as earnings season nears. Additionally, high yield spreads are widening, and volatility measures show that investors’ mood is complacent.
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My latest Friday afternoon yarn with Journalist Tarric Brooker (@AvidCommentator on Twitter). We look at the latest ructions in the markets and ask what is going to happen next – what is below the waterline, with the help if Tarrric’s slides.
Copies of the slides can be found at: https://avidcom.substack.com/p/charts-that-matter-30th-september
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Digital Finance Analytics (DFA) Blog
But Its Just The Tip Of The Iceberg: With Tarric Brooker [Podcast]
