Weekly Market Recap

Room to run

07/06/2021

Week in review

Australia real GDP stronger at 1.8% q/q for 1Q
RBA keeps cash rate on hold at 0.1%
U.S. ISM manufacturing stronger at 61.2

Week ahead

Australia business confidence
Australia consumer confidence
ECB rate setting meeting

Thought of the week

Equity markets are forward looking and tend to run ahead of the economy, quickly pricing in any expected swing in economic momentum. This has been reinforced by policy measures that are committed to driving economic growth and pushing inflation above central bank targets. Investors may be more sensitive to these dynamics given just how much liquidity has been pumped into financial assets, and the elevated valuations so early on in the new business cycle. Some are concerned that this will lead to a period of consolidation in equity markets, triggered by rising government bond yields and a reduction in liquidity. The very high levels of business surveys suggests there is more room for the global economy to recover. This should lift earnings growth expectations and underpin the outlook for equity markets. However, markets are already discounting a lot of the ‘good news’ on the economic outlook, which suggests equity returns will be more modest from here.

More to go in the global economic recovery

Composite Purchasing Managers’ Index and real GDP growth

Source: Markit, J.P. Morgan Asset Management. Data reflect most recently available as of 03/06/21.
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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