26 Jun 2023
Quarterly Market & Economic Update – Quarter 2, 2023 with Chris Lioutas.
Economic growth continues to slow around the globe, and the priority remains bringing inflation down to manageable levels with continued rate hikes from central banks. The US and European economies still look likely to head into recessions and uncertainty remains around the impact of China’s reopening on global markets and economy.
Chris Lioutas discusses:
- US Debt Ceiling: After many days of negotiations and 2 days before the US was due to run out of money, President Biden has signed a deal on the US debt ceiling. The deal went through with very few fiscal concessions and surprisingly, no upper limits were set, with the debt limit being extended until after the next presidential election in Jan 2025. Although the deal won’t make a meaningful dent in the $31tn debt pile, it does remove the risk of the US potentially defaulting and consequently, markets have settled.
- China Reopening: China officially reopened its borders post-Covid in November last year after a 2.5-year lockdown, but recovery has been slow and patchy. This is due to China not providing a stimulus safety net which has affected consumption patterns. This slow level of reopening has irritated markets, and economic data remains weak in some areas. However, we are taking a long-term view on investing and remain comfortable with the outlook.
- Interest Rates and Inflation: Headline inflation has come down which is good news; however, core inflation is going in the wrong direction and accelerating upward. This is mainly around service inflation and property and rent inflation. Consequently, central banks will have to be more severe with their rate increases or leave rates at higher levels for longer. There is now little to no expectation of rate cuts this year, and markets have reacted accordingly.
- Recession: We remain the lucky country, with Australia being the least likely to head into recession. This is due to the RBA and the government forecasting economic growth at 1 to 1.5% because of our strong commodities and agricultural base. Additionally, full employment levels and increased immigration are further helping to strengthen economic growth and put pressure on inflation.
The Investment & Research team at PSK are always monitoring market conditions and data points to ensure portfolios align with our overall long-term objectives.
If you’d like to discuss any of the points raised, please do not hesitate to contact us on 8365 8300.
General Advice Warning - Any advice included in this video has been prepared without taking into account your objectives, financial situation or needs. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation or needs.
