Week in review
- RBA holds rates at 4.35%
- Bank of England holds rates at 5.25%
- China PMI for services 52.5 in April
Week ahead
- Australia business conditions
- Australia labour maket report
- U.S. CPI inflation
Thought of the week
The U.S. equity market has partially recovered its April losses and is just over 1% off of this years peak. Many of the pillars that supported the earlier rally remain in place. Economic data is looking better, the Fed remains on track to cut rates as the rate of inflation ebbs, corporate and household balance sheets are robust, and the earnings outlook is positive. As such the path of least resistance is likely higher for equities, but the returns from todays levels lower. Parts of the U.S. market are exhibiting valuations that appear a little stretched, limiting further re-rating. Rising real wages could impinge on margins and top line revenue constrained in a moderate growth environment where some consumers are facing pressure. However, while expected returns maybe lower, the ride could be a little smoother. Years when equities have greatest number of all-time highs tend to have the lowest volatility.
U.S. equities: The more all-time highs, the lower the volatility
Number of all-time highs and larger daily market moves, price returns since 1984
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