In this quarterly update, Chris discusses four key areas shaping the current economic landscape:
1. Interest rates in Australia: The RBA surprised many in November by raising interest rates after a substantial pause. The two key indicators for the rise were, monthly inflation did not decrease as expected, and retail sales rebounded unexpectedly, signaling a potential strengthening of the economy. While there remains a chance of an early rate hike in 2024, the expectation is for the RBA to maintain the current rates.
2. Inflation around the globe: Inflation has pivoted from being the result of global factors caused by covid such as closed borders, labour shortages and increased demand to a localised issue by country or region. In Australia, inflation is still being fueled by labour shortages. In contrast the USA is experiencing a slowdown due to rate increases and decreased demand. Europe is facing significant inflation due to their energy dependence. Japan on the other hand is now showing a shift from a multi-decade period of deflation to their first spell of inflation.
3. China’s Economy: China’s economic recovery process will take several years with the government continuing their recent changed approach to stimulating the economy by moving away from broad large-scale stimulus to targeted smaller amounts with increased frequency. We are expecting a potential slowdown in China later this year or early 2024, with a protracted recovery period.
4. New world conflict and market reaction: The market has adjusted quickly to the new conflict in the Middle East and the ongoing Russia-Ukraine conflict. Both these conflicts remain region specific and global resources have adapted around them. We remain vigilant for any escalation or new involvement from other countries or worsening conditions. However, we would anticipate any new impacts as short-term.
5. 2024 Outlook: The 2024 outlook is uncertain, given the multitude of impending changes and uncertainties. Key factors to watch are the trajectory of inflation, potential continued rate hikes, and corporate earnings. While economic conditions are anticipated to weaken, possibly leading to recessions in some economies, the impact on different asset classes will vary. We will carefully navigate these conditions and although it might be a challenging period, we are cautiously optimistic.
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.
