Monthly Market Update
Global economic growth has continued its broad-based pick-up in June. Labour markets have tightened further in many countries and forecasts for global growth have been revised up since last year. There are hints that US GDP growth will be firmer in quarter 2 than in quarter 1, improvement in Europe, plus signs that growth in Asia is holding up well including China. Against these signs of improving global economic activity, economic growth in Australia continues in spits and spurts and remains fragile. Our outlook remains positive, if not bullish, so long as left-of-field events (escalation of issues with North Korea) do not disrupt the current economic pathway.July 2017 Market Update (10 downloads)
During early June Royston Capital held its half yearly Smart Investor Market Update at the RACV City Club Presidents Room. Clients and guests heard from Ofer Karliner, Victor Yeung, Dean Italia (who filled in for Chris Black at the last minute) and myself. Aside from the lovely surrounds and sumptuous lunch that was provided, clients and guests were presented with our view of the investment world along with a brief update on legislative changes that are impacting many investors.June 2017 Market Update (13 downloads)
The ‘Trump Trade’, which saw equities rise strongly, bonds sell off, and the US dollar strengthen, has weakened as investors reassess the Trump administrations ability to implement its economic agenda. The ‘Macron Trade’ is however, on. His ascendancy to the 2nd round run-off against Le-Penn for the French Presidency has eclipsed that of Trump. Meanwhile global economic growth has continued to show signs of improvement with international agencies shifting global growth forecasts higher. US economic growth indicators have settled back a little, although most survey reports of consumer and business activity remain strong. Surprisingly growth in China firmed and less surprising has been the improvement in Europe. Central banks continue to edge away from their extreme expansionary settings and the US Federal Reserve has even talked about running down its bloated balance sheet in tandem with slowly rising interest rates. The Reserve Bank of Australia has been on hold for an extended period as it balances competing risks to the economy but recent comments imply a slight shift to indicate the next move will be up. Aside from elections in Europe and central bank policy, geopolitical risks continue to simmer. The Trump administration is taking a tougher stance against Iran, Syria and notably North Korea.May 2017 Market Update (17 downloads)
The global economy entered the second quarter in good shape with growth broadening through March. Uncertainties still remain particularly in relation to the US Trump Administration’s ability to implement its planned fiscal spending and tax cuts. Regardless, US economic growth is gathering pace. Rising wage pressures look set to push underlying inflation higher giving the US Federal Reserve more scope to continue its normalisation of interest rates and move towards reducing its’ oversized balance sheet. The recovery in emerging economies is broadening out, assisted by higher commodity prices. China is however expected to fade as policy makers focus on credit risk and tighten monetary policy settings. Meanwhile in Australia the economy continues to walk a fine line between too much stimulus overheating the property market and not enough stimulus to improve employment conditions.April 2017 Market Update (45 downloads)
Conditions in the global economy continue to improve with business and consumer sentiment picking up and most leading economic indicators pointing to stronger growth ahead. Above-trend growth is expected in a number of advanced economies, although uncertainties remain. Headline inflation rates have moved higher in most countries, partly reflecting higher commodity prices, although there are still no signs that the lift in inflation will be maintained. The US however, where the economy has a tighter labour market, is seeing inflation shift upwards and will likely force the Federal Reserve to increase interest rates. Monetary policy easing in other countries is also expected to have come to an end. In Australia, gross domestic product (GDP) looks set to improve and continue its transition following the mining investment boom.March 2017 Market Update (47 downloads)
The global economic outlook has shown signs of momentum in January. Economic readings from the US, China and Europe were consistent with firmer GDP growth on balance, and signs continued to show that the period of very low inflation is turning and that inflationary pressure is starting to build, albeit slowly. Meanwhile in Australia, while there has been little new data over the holiday period, it seems there is still no acceleration from the recent subpar period of GDP growth—the miners have been performing very well thanks to the improved global outlook and higher commodity prices, but other assets remain dependent on a still-elusive pick-up in the pace of economic activity. There are signs that Australian GDP growth will be materially stronger when Q4 GDP is released early in March, but inflation in Australia may take some time to lift.February 2017 Market Update (42 downloads)
November 2016 is likely to be remembered not for the economics but for the surprise victory of Donald Trump in the US Presidential election race. Financial markets moved quickly and focused in on the growth-positive initiatives of Trump’s policy pledges – lower taxes and more government spending.November Market Update (68 downloads)
Markets were mixed in October as investors tried to digest a wide mix of influences. These included firmer economic readings in several key economies, increasing likelihood of a rate hike by the US Federal Reserve (FED) in December, the US Presidential election and ongoing concerns and uncertainty about Brexit.October Market Update (82 downloads)
During the month of September the global economic expansion continued at a lower than average, but moderate pace. Labour market conditions in advanced economies have improved over the past year, but growth in global industrial production and trade remains subdued. Actions by Chinese officials have been supportive of growth, but the underlying pace of growth in China continues to moderate. Central banks, notably the Bank of Japan (BoJ) and US Federal Reserve (Fed), seemed to indicate in the month that monetary policy easing may be over. The BoJ now specifically seeking to steepen the yield curve while the US Fed are talking up the possibility of tightening soon.September Market Update (76 downloads)
As reporting season draws to a close, it has largely been a forgettable financial year for Australian listed companies with earnings down around 8% driven by resources (weighed on by weak Chinese demand), and to a lesser extent, the banks. It was less the performance this year however that has dragged the market down 2.8% in August, but more the dour outlook statements that have highlighted the weak state of the underlying economy in Australia, that was confirmed this week with 0.5% Q2 Gross Domestic Product (GDP) growth, coming in behind expectations, in part by worse than expected terms of trade as export prices were weak.August Market Update (90 downloads)
Political risk, uncertainty and volatility have been the key theme of the last month with Brexit, changing guidance from central banks and electoral uncertainty in Australia all driving markets.June Market Update (132 downloads)
While Australia meanders through one of the longest election campaigns in recent memory, economic and political signals both domestically and internationally have been mixed, with markets largely tracking sideways as a result.May Market Updatde (143 downloads)
It’s been a busy week in Australia with the Turnbull led Government calling the non-surprise Double Dissolution Federal election. While there may be some uncertainty about global and even Australian economic prospects, the future track of Australian interest rates has become clearer. The May Reserve Bank of Australia (RBA) policy meeting along with the quarterly Monetary Policy Statement on Friday 6th of May settled a few issues about the outlook for interest rates which had previously divided economists.April Market Update (139 downloads)
The global economy continues to limp along. January and February were challenging but March provided some relief for equity investors as risk assets mostly strengthened with the backdrop of slightly better global economic growth and confirmation that the US Federal Reserve is moving very cautiously.
February was a challenging month for global markets. While declines were not as sharp as January, not doubt risk aversion remains high with investor concerns about the growth outlook impacting risk assets such as equities.