It was another positive week for equity markets with both local and global equities up strongly. The ASX 200 Index reached an all-time high led by the resources sector (+2.3%), capping off a solid 1h24 domestic reporting season, which saw an upward revision on the earnings outlook for the market. This followed on from the most recent US reporting season, which also saw an increase in the earnings outlook. With over 80% of companies in the US S&P500 Index trading above their 200 day MA, the performance of US markets is not just linked to the ‘Magnificent Seven’.
Equally, the uptick in equity markets is against a backdrop where any cuts in cash rates remain some way off given current inflation data. While the domestic CPI print for Jan (+3.4% y/y, flat pcp) was slightly below markets estimates, key segments of non-tradeable inflation continue to remain a challenge with education (+4.7%), housing (+4.6%), food (+4.4%) and health (+3.9%) all above the RBA’s target. In the US, Core PCE CPI (+2.1% q/q) was also slightly above market estimates, although annualised PCE CPI (+2.4%) continues to remain anchored in the midpoint of the Fed’s target band. However, developed market rate cuts are off the table until the 2h24 in our view, and while this will continue to put pressure on some interest rate sensitive sectors, given the uplift in the earnings outlook we believe that equity markets can hold on to the recent gains. In addition, with the likelihood of no further rate hikes, we believe this will also assist the performance of growth assets should the earnings outlook remain sound.
This week sees the release of 4q23 (Aust) GDP data (f’cst +0.3% q/q, +1.4% y/y). While the quarterly numbers are expected to be +0.1% stronger, f’cst weaker annualised GDP (-0.7%) figures will continue to highlight the challenges facing the domestic economy. In addition, the release of ANZ job ads series will also provide a gauge to the strength of labour markets. US employment data is also due with the Un rate f’cst to remain steady at 3.7% (Feb), despite a sizeable f’cst decline in nonfarm payrolls (f’cst +200k, -153k pcp). In China, Feb PPI data (f’cst -2.5) is likely to show further price contraction across the economy, although the broader CPI (Feb) is expected to move into positive territory (+0.2%, +1.0% pcp). A small win.
This post has been prepared by Infinity Capital Solutions Pty Ltd (ABN 41 621 447 345) (AFSL Number 515762) (ICS). By reading or otherwise attending this presentation, you (the reader, recipient, or attendee) agree to be bound to the below terms and conditions.
This post and any supporting materials may be regarded as general advice. That is, your personal objectives, needs or financial situations were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of any general advice we may have given you, having regard to your own objectives, financial situation and needs before acting on it. Where the information relates to a particular financial product, you should obtain and consider the relevant product disclosure statement and/or Target Market Determination before making any decision to purchase that financial product. The material in this post is correct and complete as of the date it was posted. Infinity is not responsible for, and expressly disclaims all liability for, damages of any kind arising out of use, reference to, or reliance on any information contained within this post.