Economics – Page 13 – Digital Finance Analytics (DFA) Blog

Uncertainty Rules As Markets Face A Wicked New Year!

This is our weekly market update, starting in the US, Europe, Asia and ending in Australia, covering crypto and commodities along the way.

2024 ended up as an eventful year for markets, as many stock indices recorded sizeable double-digit gains, though with significant volatility. But the start of 2025 could well mark a shift in tone, with the MSCI global index down 2.08% over the past week. US stock indices were slightly in the red at the start of the new year too, encapsulating the overall market uncertainty about the short-term outlook. Inflows into U.S. equity funds fell sharply in the week through Jan. 1 hit by rising Treasury yields and year-end profit- taking, along with concerns about a slower pace of Federal Reserve rate reductions this year. U.S. equity funds received just $490 million worth of investments during the week, significantly smaller than the $20.46 billion in net purchases in the week before.

But on Friday The Dow Jones Industrial Average rose 0.80%, to 42,732.13, the S&P 500 gained 1.26%, to 5,942.47 and the Nasdaq Composite gained 1.77%, to 19,621.68. Even so, all three indexes posted modest declines for the week, with the S&P 500 logging its third weekly loss in four.

Australian shares shrugged off a decline on Wall Street to close higher on Friday, buoyed by a rally in energy stocks. The S&P/ASX 200 closed at 8250.50 up 0.6 per cent. The All Ordinaries index closed at 8511.9. On Thursday and Friday, the benchmark pared back earlier losses in the holiday-shortened week for a flat four-day return.

Australian investors looking to the US for better returns, with Wall Street focused exchange-traded funds reportedly pulling in at least $5 billion from Australian investors in 2024, eclipsing the record of $2.5 billion set in 2021, according to preliminary flows data compiled by ETF provider Global X. The billions of investor capital flooding into the world’s No.1 market represents a bet that US equities will continue to outpace their global peers – including Australia – for the second year running, capping a 23 per cent gain in 2024 atop a 24 per cent rise a year earlier.

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Digital Finance Analytics (DFA) Blog

Uncertainty Rules As Markets Face A Wicked New Year!

00:00 / 00:21:15

The Low Road For The Aussie Has Real Consequences For You!

The Australian dollar has fallen sharply, falling at one point to a multi-year low of 61.88 US cents — a level not seen since October, 2022. A weak Australian dollar, which was changing hands at US62.20¢ on Thursday, makes imported products such as oil more expensive, adding to domestic inflation.

Whilst a weak Aussie can be seen as welcome news for Australian exporters as their goods and services become more price competitive, and for international tourists visiting Australia, for Australian tourists heading overseas, it can pose a problem to the hip pocket nerve and importantly, a falling Australian dollar can also put upwards pressure on inflation meaning the RBA won’t cut interest rates.

So today we look at why this is happening, and importantly what it means for Australian Interest rates, and the news is not good for those highly leveraged households under financial pressure.

The Australian dollar has also fallen to 0.4940 British pence, despite the UK economy also being in a slow growth mode. But the bottom line is a weak Aussie does not provide conditions for an early rate cut.

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Digital Finance Analytics (DFA) Blog

The Low Road For The Aussie Has Real Consequences For You!

00:00 / 00:09:52

Australian Home Prices Teeter On A High Cliff…

Well, there should be no surprise that home price growth is easing, and indeed prices are falling in some places up to the end of the year, as a combination of higher for longer interest rates, broader financial pressures, reduced borrowing capacity and even easing migration are all taking their toll. This despite assurances from Clare O’Neil that prices would not drop.

The reality is that gravity is finally catching up with the market. Many observers expected home prices to fall in response to the Reserve Bank of Australia’s (RBA) aggressive interest rate hikes, which made property significantly more expensive. However, prices defied gravity and increased due to record net overseas migration and acute stock shortages. But as a result, Australian property values have decoupled from borrowing capacity, resulting in historically low affordability. Realistically, home prices will continue to fall until the RBA cuts interest rates, increasing affordability and borrowing capacity. But even then, growth will be anemic at best, This is consistent with our three scenarios and our base case as reported in recent months.

Today’s post is brought to you by Ribbon Property Consultants.

If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.

Buying property, is both challenging and adversarial. The vendor has a professional on their side.

Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.

Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.

Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.

Digital Finance Analytics (DFA) Blog

Australian Home Prices Teeter On A High Cliff...

00:00 / 00:13:05

DFA: Looking Back And Looking Forwards…

In this episode we review our most viewed shows from 2024, and identify the key issues and themes which got the most attention. Interestingly there are clear connections and observations…

Let me know in the comments what your favorite shows were, and what you would like me to cover this coming year.

Thanks to all those who supported us last year, and I look forward to sharing daily shows through 2025.

Happy New Year!

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Digital Finance Analytics (DFA) Blog

DFA: Looking Back And Looking Forwards...

00:00 / 00:45:43

From Here, Where For The Markets?

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 on the way. And as this is the last full trading week, we will also look back at the last year.

There is a nice meme going round, highlighting that high priced stocks attract, others do not, but that does also beg the question, should we follow the crowd – and is the smart money or dump money lurking there? Sometimes its better to zig when everyone else zags!

The MSCI global index was down 0.59% on Friday, through up 0.88% across the week, and the one-year return was 17.14%, as we will see, driven by tech and US markets in the main. Remember though that light trading and short hours mean the markets are capable of giving deceptive signals this past week.

AMP’s head of investment strategy, Shane Oliver, is warning of a “volatile ride” given the sharemarket’s stretched valuations – the ASX 200 is trading at more than 18 times forecast earnings – and heightened geopolitical risk as Donald Trump returns to the White House. Still, Dr Oliver is tipping the ASX 200 to achieve 8800 points. He said the prospect of better growth in late 2025 should deliver “ok investment returns” with the caveat that a 15 per cent market correction during the year was “highly likely”.

JPMorgan’s Jason Steed is adopting a bearish footing, tipping Australia to be the only major sharemarket to decline in 2025. His target of 7900 implies a decline of about 6 per cent from current levels because of a weaker economic backdrop with gross domestic product below 2 per cent, and a softening earnings outlook.

Finally, in crypto. The overall cryptocurrency market capitalisation approached $3.8 trillion, nearly doubling over the past year. To the surprise of many, 11 bitcoin (spot) ETFs were approved by the SEC early January. Since launch, they have attracted more than $40 billion net inflows and their cumulated assets under management are almost as large as those held by Gold ETFs.

Looking ahead to 2025, an especially complex and uncertain future awaits. Expect a reacceleration of US inflation which will cause the FED to pause more cuts, and add-in the possibility of serious geopolitical shocks, and it is easy to get anxious.

The future is complicated by the advent of the new Trump regime, which renders so many different potential paths and potentially false signals. The partnership between Trump and Elon Musk could be key, if that relationship survives. But given the stretched market valuations and rising inflation risks, as global debt expands further, perhaps its not that surprising that some are taking profits, and waiting to see what happens next. Time will tell.

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Digital Finance Analytics (DFA) Blog

From Here, Where For The Markets?

00:00 / 00:25:34

DFA Live Q&A Replay: Tony Locantro’s Christmas Box

This is an edited version of a live discussion with Tony Locantro, as we review 2024, and look ahead towards 2025.

Tony offers several financial services, such as investment management, financial planning, stock selection and fundraising. Tony has helped countless investors and organisations with strategic investment strategies over the last two decades.

His understanding of market psychology has ensured valued investment strategies in bull and bear markets. Because of his ability to understand the small cap market space, Tony has been featured in dozens of well known publications across Australia, such as Small Caps, Sky Business, Digital Finance Analytics, and many more.

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Digital Finance Analytics (DFA) Blog

DFA Live Q&A Replay: Tony Locantro’s Christmas Box

00:00 / 01:10:57

Its Edwin’s Monday Evening Property Rant!

As we run down to Christmas, we look at the state of play of property with our insider Edwin Almeida, touch on the question population growth and the need for real building surveys, and also remind people to “Think Asbestos” through the DIY season as we commemorate Gill’s death on this day 3 years ago.

Home

The Shadow Of Asbestos Still Haunts: https://youtu.be/d-zZuBoWzQA

You can join us live next Monday 30th December at 8pm Sydney for our final Rant of the year….

Today’s post is brought to you by Ribbon Property Consultants.

If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.

Buying property, is both challenging and adversarial. The vendor has a professional on their side.

Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.

Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.

Digital Finance Analytics (DFA) Blog

Its Edwin's Monday Evening Property Rant!

00:00 / 01:05:36

Destroying Tent Cities Does Not Solve The Housing Problem!

Migration into Australia remains too high, and has directly and indirectly caused a massive rise in homelessness. Tent cities have sprung up, and some councils are now trying to clear them moving homeless people on. So today we look at what caused the problem, and what this means for the homeless.

One academic describes the decision by a homeless person to be seen as a “political act”. “They’re demonstrating their kind of deprivation through living in a tent in the public realm, and I’m glad that it pisses people off,” Cameron Parsell, a social sciences professor at the University of Queensland, says. “We should be pissed off. But rather than being pissed off by the people in the park, we should be pissed off about the lack of affordable housing.”

For all the concern about safety, several service providers said the crackdown risked undermining the group most at risk – homeless people themselves.

There are two schools of thought about safety. Many trust in safety in numbers; clearing a park forces people to adopt the other approach, staying out of sight. That doesn’t always work.

Many believe the crackdown is not about safety at all, but about visibility. Keeping homeless people apart keeps them out of sight.

The Guardian article made no reference at all to the migration problem. But my point is that homelessness could be eased if migration was pulled significantly lower, allowing time to catch up on building, and to get people into homes.

But no, Federal Government keeps the tap open, and councils are moving homeless people on from pillar to post. This simply does not solve the problem, and the social consequences will be enormous.

http://www.martinnorth.com/

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Digital Finance Analytics (DFA) Blog

Destroying Tent Cities Does Not Solve The Housing Problem!

00:00 / 00:14:14

Is It Hard Hat Time As The Santa Rally Turns Decidedly Frosty?

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.

Recently, we saw markets charging higher, as many markets touched all-time highs again on the expectation of more rate cuts, but that changed this week, following another pivot from the FED and more strong economic readings gave pause for thought. While the U.S. central bank on Wednesday cut its benchmark overnight interest rate by 25 basis points to the 4.25%-4.50% range, it projected only two rate reductions in 2025, citing the economy’s continued resilience and still-elevated inflation.

We also briefly had the risk of a US Government shut down to content with, though that was averted. The messy process of averting a U.S. government shutdown offered investors a glimpse into challenges the incoming Trump administration will face in implementing its agenda, adding a market concern for the coming year. At very least Trump is likely to lead with bold threats and leverage them to push negotiations in his favor. Republican hardliners who normally are ardent Trump supporters are resisting his push to raise the U.S. debt ceiling, sticking to their belief that government spending needs to be pruned and defying his warnings of revenge. “Granted, Trump isn’t president yet, but he will interject ideas at the last minute and there’s no guarantee every member of the Republican Party in Congress is going to go along with his ideas,” said Brian Jacobsen, chief economist at Annex Wealth “That is a formula for gridlock, uncertainty, and volatility.”

And we also had the triple witching, where options contracts expire which added to the complexity.

All up although Friday saw US markets turning more positive again, across the week, drops were widespread, with the MSCI Global index down 2.53%, though still up 16.13% year to date, with the Dow Jones Industrial Average was up 1.18%, but still down 2.25% for the week, its longest losing streak since October 1974. The S&P 500 index gained 1.09%, but down 1.99% across the week while the NASDAQ Composite index climbed 1.07% having fallen 1.78% across the 5 days.

Michael Saylor, Chairman of MicroStrategy, dropped his usual post on X Saylor issued a four-word statement: “Wear a Hard Hat.” as Bitcoin experienced a sharp decline, falling to $94,000 from its peak of over $100,000.

Saylor’s advice could well be true for other market participates too, as given the high quantum of uncertainly in the weeks ahead, wearing a hard hat makes sense as market volume declines over the holiday period, and as many stocks are in over valued territory. It could be a very frosty period for investors.

http://www.martinnorth.com/

Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/

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

Digital Finance Analytics (DFA) Blog

Is It Hard Hat Time As The Santa Rally Turns Decidedly Frosty?

00:00 / 00:19:14

A Bet On Australia Is Bet On Government: With Tarric Brooker

I caught up with journalist Tarric Brooker for a look back over the year, and what might be up in 2025, including of course some great slides.

We dwelt on housing and Government policy, the structure of the economy and what might be underlying the dire numbers reported recently. How much is spin and how much is real?

You can catch Tarric’s work at https://www.burnouteconomics.com/

The latest slides are here: https://www.burnouteconomics.com/p/dfa-chart-pack-christmas-special

http://www.martinnorth.com/

Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/

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

Find more at https://digitalfinanceanalytics.com/blog/ where you can subscribe to our research alerts

Digital Finance Analytics (DFA) Blog

A Bet On Australia Is Bet On Government: With Tarric Brooker

00:00 / 01:05:48