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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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.
- The impact of geopolitics on markets tends to be short-lived.
- 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.
- US Job Growth strong in September, Wage Growth cooling. Yields pricing in higher for longer interest rates.
- Australian consumers still depressed, but business conditions okay.
- We remain cautiously optimistic but continue to have one foot at the door to re-apply hedges if market starts to decline again.