Economics

While the market is broadly underweight China, South African-based Foord Asset Management is confident that President Xi Jinping’s economic plan for the country will bear fruit over time.

The cost of living has risen dramatically in 2022, with the Reserve Bank of Australia increasing the cash rate seven times since April and the major banks keeping pace on mortgage rates. But there could be good news on the horizon.

Economists agree the outlook for house prices in 2023 is largely dependent on upcoming interest rate decisions by the Reserve Bank of Australia, and signs of weakness are already appearing. Complicating matters further, borrowers face an impending fixed-rate cliff.

The red-hot lithium market is forecast to cool over the near term, but the outlook around where prices will settle over the long term is less certain. Several variables are at play that could alter the direction of the market.

Investors are flocking to risk stocks in the hope of an early Fed pivot following a better-than-expected US inflation report. While it is too early for a pivot, according to Atchison Consultants, the longer-term outlook for fixed income is positive.

The Reserve Bank of Australia is sticking to its view that inflation will be temporary, despite its poor forecasting track record. Economists aren’t so sure.

Central banks are likely to continue inflating interest rates around the world, with the US federal reserve at the vanguard. Be wary of thinking markets have gone through the fire already, Sage Capital warns.

Tightening of central policy on a global scale is creating valuation arbitrage across the board, and creating opportunities for skilful investors.

Chinese deflation is exacerbating US inflation, which could lead to further wage price spiraling and a US core inflation figure stuck above 3.5 to 4 per cent according to BCA Research.

Powerful forces are spooking global economies and pushing investors into safe haven assets like US dollars and US treasuries, and in turn flattening the relative value of our domestic currency.

As a forty-year long bull run fuelled by cheap money screams to a stop, markets are at an inflection point. This time really could be different.

An erosion of trust has changed the investor psyche to one that prefers companies which generate cash profits with a long term focus, according to Schroder’s’ Martin Conlon.