Typically, January is a quiet period for new year resolutions and holidays, although this year, there is much movement in the economy given the current state of the world.
Sporting events are drawing domestic and international tourists alike and the aviation sector is moving rapidly to ensure travelers arrive on time, for now. Let’s watch and wait to see if that remains.
Given the global state of the world, market reports have been steadily focused on falling inflation, interest rates changes, cost of living challenges, current spending and consumer trends. While there are not so quiet discussions of interest rate cuts in the United States, employment rates and inflation are key factors. Investors will be watching with interest.
Key observations for the week focus on interest rates, inflation, natural resources and US reporting season.
Interest Rates
Fresh economic data has bolstered the case that interest rates have peaked domestically, there is much discussion on the local and international markets of what happens next, all eyes will be on the next Reserve Bank of Australia meeting in February, which will guide the monetary policies, interest rates and inflation for 2024. Globally the discussion is whether the United States will cut interest rates, while locally, the focus will be on the Reserve Bank of Australia. ‘Are we there yet, are we there yet’ is the continued catch cry.
Natural Resources & Iron Ore
While there is a strong move towards sustainable energy sources in Australia, iron ore remains one of Australia’s largest income earners, as the natural resources sector in Australia further bolsters the economy.
Iron ore prices has been stronger than usual throughout December 2023, with a price wobble this week, investors await further demand increases post Chinese New Year, a time of year when the Chinese steel mills usually stock up. The recent news of further Chinese economic stimulus is most welcome.
US Earning Season, Jobs Growth and Inflation
With back to school in Australia and the lead up to the Australian and US reporting season, investors will have their score cards out.
Earnings are expected to be robust despite the list of uncertainties as the US enters the Year of the Election (YOE).
Election years in the United States (since 1950) have typically been kind to markets. This is even after a year of strength in prices as was experienced last year, albeit the Australian market took 11 months to wake up in 2023.
US Consumer Price Index (CPI) data overnight as noted below, was as expected and at present, investors are pricing in rates cuts at the US Reserve Bank meeting in March 2024.
Source: Bloomberg
The Fear Index (VIX) is still tracking at a low level as at last night.
Look where we were in Covid times, relative to now, investors are relaxed for now.
Source: Bloomberg
To conclude, given the global state of the world, market reports have been steadily focused on falling inflation, interest rates changes, cost of living challenges, current spending and consumer trends. The key trends of interest rates, natural resources, iron ore, US Reporting season and inflation will continue to be points of discussion for the month and year ahead. Tune into Disrupt Radio Tuesday 16th January 7:15am ‘Morning with Libbi Gore to hear more on the 2024 outlook with Siobhan Blewitt, Founder and CEO of Frais Capital.
