FNArena’s Weekly Insights – May 20 2024
In this week’s Weekly Insights:
-Rate Cuts Equal Optimism
-All-Weather Model Portfolio
-Model Portfolios, Best Buys & Conviction Calls
By Rudi Filapek-Vandyck, Editor
Rate Cuts Equal Optimism
This might surprise a few readers, but the Australian share market is up more than 3% ex-dividends since the start of the calendar year.
Assuming the remaining six weeks or so don’t include any major sell-downs or crises, the ASX looks en route to posting a double-digit return including dividends for the financial year ending on June 30th.
With another ten days or so to go, May’s total return may well exceed March’s 3.30%, all else remaining equal, with a new all-time record high seemingly within reach.
Yet, anecdotal evidence, including from the database of subscribers here at FNArena, suggests the mood among investors is a lot more sombre. Daily trading volumes on the local bourse are nothing to crow about.
All that talk about the Albanese government’s latest budget poking the resident inflation bear is clearly weighing on people’s minds, as does, probably, the rise in anecdotal evidence that higher-for-longer interest rates (bond yields) are creating a recession-like environment for the vulnerable parts in society.
The latter, by the way, is an international phenomenon, not just in Australia.
The neighbourhood in which I live and work has lost two restaurants in the space of two weeks. There are a number of empty commercial spaces that are not being filled with new tenants. It’s rough out there if you happen to be on the wrong side or in the wrong place.
But such anecdotal observations have been around for more than twelve months now. The pace at which they enter the official statistics, both locally and in the USA, has been excruciatingly long-winded.
Meanwhile, the negative correlation between bond markets trying to guess the next move in central bank policy, as well as the timing of it, has injected a lot more volatility, and uncertainty, into equity markets.
Up one day, down the next. And then everyone has an opinion about inflation, the underlying statistics, government failures, corporate greed, and hapless central bankers.
It’s far too easy to get lost inside the daily noise on social media. But also, why are markets so resilient when there’s so much uncertainty and risk around?
