Portfolio Manager Leon de Wet from our strategic partner, Elston Asset Management, gives their latest economic updates.
Investors are rushing to “look through” the global economic downturn, but we believe the optimism remains largely unfounded.
We’ve been surprised at how quickly many investors have shifted their monetary policy expectations, particularly from the US Federal Reserve, toward easing rates instead of aggressive tightening.
We think that’s probably too optimistic…we’ve also been surprised at the extent of the rallies in equities, those more credit-sensitive parts of the fixed-income market, and even in government bonds.
Markets have probably got a bit ahead of themselves in terms of how quickly the cavalry –the central bank pivot – is actually going to arrive.
And on Australia, more specifically, we believe it’s certainly too early to discuss a rate cut, given the strong employment data here.
But the above scenarios, alongside our outlook for a weaker US dollar, also create opportunities in some large global markets.