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This is an edited version of a live discussion about the state of play relating to the Australian economy, housing and finances with Leith van Onselen, Chief Economist at Nucleus Wealth and Co-founder of Macrobusiness.
Where are interest rates headed, and what will the fall out be?
Go to the Walk The World Universe at https://walktheworld.com.au/
So the NASDAQ ended lower on Friday as megacap growth stocks came under pressure after Treasury yields pointed to higher interest rates as yields on the benchmark 10-year Treasury note rose to their highest in more than a month following an auction on Thursday of 30-year bonds that saw weak demand. The yield on the US 10-year note rose 9 basis points to 3.743 while the two-year bill was at 4.53 per cent. And shares of ride-hailing firm Lyft plunged following a downbeat profit forecast.
The NASDAQ posted its first weekly fall this year, down 2.41%, while the S&P 500 ended the week lower 1.11% and the Dow Jones lost 0.17%, in a week dominated by hawkish commentary from U.S. Federal Reserve officials and earnings reports from more than half of the S&P 500 constituents.
But a rally in energy stocks as oil prices climbed on Russia’s plans to cut crude supplies helped push up the Dow and the S&P 500 The energy sector jumped 3.92% while the consumer
discretionary sector fell 1.22%.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Our weekly market review and update, covering the US, Europe Asia and Australia.
CONTENT
0:00 Start
0:20 Introduction
1:30 Bonds
2:00 Markets
5:40 Oil Stronger On Russian Cuts
10:20 Europe and UK
12:08 China
13:00 Chinese Government Bonds
16:54 Rest Of Asia
18:00 Australia
21:00 RBA Hiding
25:35 Statement On Monetary Policy
26:00 Gold In Demand?
28:40 Crypto Commingling Funds
30:50 Conclusion And Close
A month is a long time for the markets, and after the stella rises in January, driven by hopes of inflation easing, and massive tax-driven trading, reality is now dawning, at least for some as strong jobs data and comments from Federal Reserve Chair Jerome Powell stoked worries about how much higher interest rates may need to climb.
“What has been going on for the last few days is that every other day there is a Fed governor going to talk hawkish,” said Kevin Rendino, chief executive of asset manager 180 Degree Capital.
In a note, JPMorgan said while it sees the potential for the 10-year US yield to edge somewhat higher, it thinks the two-year yield has hit a high and will pull back. Philadelphia Fed president Patrick Harker is optimistic about the US economy and the need for still higher interest rates. “We need to get above five — we’re really close to that right now — and then pause,” Harker said. “How much above five? We’ll see.”
So the Nasdaq ended lower on Friday as megacap growth stocks came under pressure after Treasury yields pointed to higher interest rates as yields on the benchmark 10-year Treasury note rose to their highest in more than a month following an auction on Thursday of 30-year bonds that saw weak demand. The yield on the US 10-year note rose 9 basis points to 3.743 while the two-year bill was at 4.53 per cent. And shares of ride-hailing firm Lyft plunged following a downbeat profit forecast.
The Nasdaq posted its first weekly fall this year, down 2.41%, while the S&P 500 ended the week lower 1.11% and the Dow Jones lost 0.17%, in a week dominated by hawkish commentary from U.S. Federal Reserve officials and earnings reports from more than half of the S&P 500 constituents.
But a rally in energy stocks as oil prices climbed on Russia’s plans to cut crude supplies helped push up the Dow and the S&P 500 The energy sector jumped 3.92% while the consumer
discretionary sector fell 1.22%.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
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The RBA’s Statement on Monetary Policy, out today suggests inflation will run hotter for longer and real wages will continue to shrink into the foreseeable future.
Some politicians are pushing for the Governor to resign as analysts lift their forward thinking on rates. But what is really going on? In short no one wants to take responsibility for the mega stuff-up.
Ordinary people are being hit hard, and there is no immediate relief in sight.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
The RBA’s Statement on Monetary Policy, out today suggests inflation will run hotter for longer and real wages will continue to shrink into the foreseeable future.
Some politicians are pushing for the Governor to resign as analysts lift their forward thinking on rates. But what is really going on? In short no one wants to take responsibility for the mega stuff-up.
Ordinary people are being hit hard, and there is no immediate relief in sight.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Stocks have enjoyed an upbeat start to the year on hopes that the Fed will abandon its hawkish rhetoric and pilot the economy to a soft landing. Traders are betting that the Fed will raise its benchmark rate to a peak of 5.1% in July, largely in line with the forecasts of Fed officials.
Many in the markets are spinning a yarn about how the inflation rate will drift lower – bobbing on the wind like a snowflake, melting away to a nice round 2%. Well, I have to tell you, I think that snowflake is in the eye of a hurricane – literally the calm before the storm. This story of a quiet adjustment is a best misleading, at worse an opportunity for others to transfer risk to the unsuspecting and make money off their backs.
A parallel to those property market “experts” who keep saying the property market is about to recover and you should buy now.
All this is fiction, as the macroeconomic backcloth points to something else, and much more destructive – soon the hurricane will be in full force. It is likely that the US economy will be in recession by the second half of 2023. This flips upside down the widely held belief that the 1st half of this year would be weak, but the second half would see a strong rebound in stocks and GDP. With the US there, other economies including Australia will get caught in the downdraft.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
While some market analysts are calling a significant rise as inflation is crushed, others are more negative, seeing a potential drop in the markets, before a pivot – but not for another year or so. Investment sentiment is out of line….
So, the question is, are further market falls likely? How low will corporate earnings go?
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
I caught up with Peter Marshall from Mozo to debrief on the latest RBA rate hikes, and the fallout.
And more rate rises must be expected too…
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.
https://mozo.com.au/authors/peter-marshall
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
While some market analysts are calling a significant rise as inflation is crushed, others are more negative, seeing a potential drop in the markets, before a pivot – but not for another year or so. Investment sentiment is out of line….
So, the question is, are further market falls likely? How low will corporate earnings go?
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Something weird is afoot. There is much talk of falling inflation, moderating wages, record-low unemployment and possible soft landings. Yet some on Wall Street says 2023 will likely turn ugly.
Sure, we had a beautiful January for investors – but what if this is only a mirage—a stock rally that’s already gone too far.
Well, this the warning from strategists at Bank of America, who said investors could face brutal declines if economic growth crumbles in the second half of the year. The risk is that inflation flares up again over the next few months, and that the US economy faces a deeper recession (than that initially predicted) after staying resilient in the first six months of 2023, they wrote. But with more experts seeing potential success for the Fed after a year of panicky recession calls, it may be a warning that’s hard for some to heed. The “most painful trade,” the bank’s strategists wrote, is always the “apocalypse postponed.”
The traditional favourable start to financial markets in 2023, due to investor fund inflows that typically accompany the new year, has been turbocharged by data pointing to a greater possibility of a soft landing for the US economy and, most recently, the signals coming out of the Federal Reserve.
So, underinvested investors need to assess their willingness to lose as valuations surge ahead of the consensus view on the economic outlook says Mohamed A. El-Erian is a former chief executive officer of Pimco, president of Queens’ College, Cambridge; chief economic adviser at Allianz; and chair of Gramercy Fund Management.
The generalised price rally has been so quick and so big for both stocks and bonds that it raises an interesting question for underinvested investors who have not yet put their money to work. What they should do correlates closely, but not entirely, to their economic and policy views.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
