FNArena’s Weekly Insights – October 10 2022
In this week’s Weekly Insights:
-Corporate Profits Will Show The Way
-Conviction Calls
-FNArena Talks
By Rudi Filapek-Vandyck, Editor FNArena
Corporate Profits Will Show The Way
Is the Federal Reserve ready to take its foot off the pedal and hike interest rates at smaller increments?
The strong response that followed the surprisingly “dovish” rate hike from the RBA last week instantaneously shows why investors globally and here in Australia are keen to find out the answer, and the exact timing of the central bank’s “pivot”.
Most forecasters still think central bank tightening will at least continue until the end of 2022 but a slower pace, a pause maybe, will likely be taken as a positive for risk assets that have had a rough trajectory these past nine months.
Surely, those pesky inflation numbers must peak at some point, and start trending downwards?
Among investors and commentators in the US, this is the debate of the moment. If not next month, then when? Plus: if not to save the US economy from recession next year, maybe then to save the global financial system which is showing up its fragility here and there?
It’s this to-ing and fro-ing, switching between hope and disappointment, that has made September the most volatile month in a long while. Measured by daily index movements of at least 1%, September offered 4 positive and 8 such negative days out of a total of 22 trading sessions throughout the month.
October started strongly as hope never genuinely dies, but disappointment has quickly followed.
Most commentators I read don’t think Powell & Co are as yet ready to follow the RBA’s example, even though system fragility will be on the Fed’s radar.
Last week’s statement from the RBA suggests Philip Lowe’s board is concerned about global stresses and Australian households, but US households carry (a lot) less debt and the Federal Reserve can move a few mountains if it has to if/when the global financial system requires plumbing.
I do think there is a clear and present danger with investors almost solely concentrating on central banks’ signals and intentions, at a time when corporate earnings should be on everyone’s mind.
Then again, this might change soon, and not necessarily for the better.
