- After the worst fall in global markets since the GFC due to concerns over slowing global growth and increasing interest rates, global markets rallied strongly over both January, February and into March.
- The primary cause of the recovery was the announcement that the US Federal Reserve was no longer going to increase interest rates approximately each quarter on an ‘autopilot’ approach, rather given there had already been 9 interest rate increases in the current cycle, the US Fed would now look to base its decision-making on how the economy appeared to be performing and watch for the longer term impacts of the previous interest rate increases.
- With US interest rates likely on hold for some time (potentially all of the 2019 calendar year) markets rallied on the basis that interest rates remaining at current levels would not increase debt related expenses, which was good for US consumers and businesses and therefore not detract from the US economy.
- In Australia, interest rates are expected to remain on hold, with the global economy slowing, market expectations of a change to interest rates have shifted from a potential increase late-2019/early-2020, to a rate cut potentially late in the year to help stimulate the economy. Currently the Australian economy remains in a steady position, unemployment has reached an 8 year low, however wage growth and inflation also remain low/flat, with the Reserve Bank of Australia to continue to asses the strength of the economy before enacting any rate changes. Overall, short-term interest rates will remain very low for the next year to two.
- For global economies, growth is expected to continue going forward, however not at the same higher rates previously experienced, with global expansion ‘muddling through’. It is also worth noting that whilst much of focus on the global growth has been on developed economies, particularly the US, where growth is expected to drop below its long-term average over the next 2 years, emerging economies such as India, and China, continue to have much higher rates of growth.
- Markets are expected to remain volatile, particularly over the coming months as the US-China trade war may come to a head, and Brexit continues to cause uncertainty in Europe.
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