Weekly Market Recap
Room to run
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
- 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
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