UGC MONTHLY MARKET UPDATE | OCTOBER 2023


Welcome to the UGC’s Monthly Market Update for October 2023.

Join UGC’s Co-Portfolio Manager / Senior Investment Analyst, Huw Davies, as he takes a deep dive into the latest financial market trends and conditions for the US and Australia, as well as providing an in-depth analysis of the stock markets.

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KEY POINTS:

MARKET OVERVIEW – US

  • Israel vs Hamas: The impact of geopolitics on markets tends to be short-lived.
  • The bull-market is one-year old, and the leadership has been unusual.
  • Market Pricing of the S&P 500.
  • Rates normalisation punishes longer duration assets, except the “magnificent 7”.

MACROECONOMIC OVERVIEW – US

  • U.S. Core inflation continues to cool, but headline inflation remains elevated.
  • H.O.P.E Cycle – Housing (NAHB), Orders (PMI) and Earnings (Profits) have peaked, next up is Employment to about to follow.
  • Steeper yield curve inversion usually synonymous with higher unemployment rate.
  • Payrolls soared by 336,000 in September, defying expectations for a hiring slowdown.
  • Wages increased slower than anticipated.

MACROECONOMIC OVERVIEW – GLOBAL

  • Israel vs Hamas: Global Growth and Inflation impact of three scenarios for how conflict of war could evolve.

MACROECONOMIC OVERVIEW – AUS

  • Most, but not all, central banks are near the peak in interest rates.
  • 13% of Borrowers With Cost-of-Living Exceeding Income After Rate Rises.
  • Fed Estimates of Excess Savings Across the Advanced Economies.

SUMMARY

  1. The impact of geopolitics on markets tends to be short-lived.
  2. At this moment, the conflict is contained. However, risks are elevated for an escalation to a wider proxy war and even direct war between countries like Iran.
  3. US Job Growth strong in September, Wage Growth cooling. Yields pricing in higher for longer interest rates.
  4. Australian consumers still depressed, but business conditions okay.
  5. We remain cautiously optimistic but continue to have one foot at the door to re-apply hedges if market starts to decline again.

UGC General Advice Past Performance Warning

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