Weekly Market Recap

A quiet place

31/05/2021

Week in review

U.S. consumer confidence falls marginally to 117.2
RBNZ holds rates, indicates possible earlier path for rate hikes
Australia capital expenditure rose 6.3% 1Q21

Week ahead

Australia 1Q21 Real GDP
RBA official cash rate
U.S. nonfarm payrolls

Thought of the week

When there is little tier one economic data, corporate news or policy announcements to digest, markets can lack direction. At these times, focus turns to other possible indicators of risk sentiment, the latest being the movement in the price of crypto currencies. As the value of crypto currencies rose earlier in the year there was a growing chorus of folks advocating their role in portfolios as another potential source of diversification. However, falling prices and momentum degradation, ie selling leading to more selling, has calmed some of those voices. Investors that have dipped their toe into crypto markets may be rotating towards more traditional diversifiers such as gold, and be more wary of the volatility that comes with new assets, such as crypto currencies (see chart). There may be a role for crypto currencies in portfolios, but the size of the allocation may depend on what you are prepared to lose.

Volatility in crypto currencies dwarfs that of equities

30 day realized volatility, annualised

Source: FactSet, Standard & Poor’s, St Louis Federal Reserve, J.P. Morgan Asset Management. Data reflect most recently available as of 27/05/21.
All returns in local currency unless otherwise stated.
Equity price levels and returns: Levels are prices and returns represent total returns for stated period.
Bond yields and returns: Yields are yield to maturity for government bonds and yield to worst for corporate bonds. All returns represent total returns. AusBond Comp is the AusBond Composite 0+ Yr, AusBond IG is the AusBond Credit 0+ Yr both provided by Bloomberg.
Currencies: All cross rates are against the Australian dollar. An appreciation of the foreign currency against the Australian dollar would be positive and a depreciation of the foreign currency against the Australian dollar would be negative.

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