Solid earnings and expectations drive volatile but positive markets despite pandemic and political issues.
- The past month has seen some volatility in the market with the introduction of the Omicron strain. With the vaccination levels starting to stall across the globe, fears of further market volatility were seen with a decrease across all of the major markets in the final week of November. However fears of further decreases were dissipated with all but the Hang Seng returning to it previous levels.
- With the fears of COVID-19 market impacts reducing significantly, the key factor across the globe can be seen to be the sticky inflation that has not decreased as first expected. With the US at the forefront of facing this issue, we are seeing professional investors take more caution in the market. However we are also seeing individual investors take greater risks to try and reach returns greater then inflation.
- Australia also saw a decrease for the month of November due to the global sell of in the final week. It has since recovered and as we continue to not receive the inflationary pressures the rest of the world is seeing, we anticipate growth to continue. The end of November saw the iron ore price increase back to over $100 USD/T off the back of China increasing it’s production again.
- Looking forward, we anticipate the continued easing of restrictions nation wide to provide a boost to the economy, particularly due to pent up demand. With the Queensland border opening back up in early December and the Omicron strain spreading, we could see further interstate spreading that could put pressure on the Australian economy.
- After a record low of 4.6% in unemployment during September, we have seen an increase to 5.2% which is the highest level since April. This is due in part to the participation rate increasing to 64.7%, however with fresh concerns around the Omicron strain we could see further volatility in this figure to finish of the year.
- The RBA continues to hold the cash rate at 0.1% and continue to maintain their stance that it will not increase until inflation is sustainably between 2-3%. With inflation is currently at 3%, however this is being impacted with the recent increases in petrol prices and construction costs. The underlying inflation is currently around 2.1%. We continue to anticipate that the cash rate will not increase for at least the next 12 months.