Russell Investments just published their 4th quarter economic update which had some interesting points we thought worth sharing:
· Investor sentiment (how people are feeling and looking towards the future) is very negative at the moment. This may indicate that investment markets, which are very much affected by sentiment, have already accounted for some of the bad news.
· Having said that, both equities and government bonds have posted negative returns so far for 2022. In fact, nearly all asset classes are demonstrating negative returns (with the exception of commodities).
· The belief is that core inflation is close to it’s peak in most developed regions however for inflation to return to the target rate, a slowing in employment creation and wages growth will need to occur. Currently in the United States, there are two job vacancies for every unemployed person. We have all seen the job advertisements in our local areas.
· In Australia, housing markets are a key source of concern with high levels of housing debt. Household debt, as a share of disposable income, is close to an average of 200% and with a high share of variable rate mortgages, there is a direct link between interest rate increases and the housing market.
· There are signs that housing activity is slowing, and house prices generally have begun to decline.
· Market pricing as the RBA cash rate peaking near 4% near mid-2023.
· The economy is expected to slow into 2023 however Russell is forecasting that a recession in Australia will be avoided.
Point to note: outlooks by economists are their view on the future, based on the current situation. As with any opinion, these forecasts can vary from economist to economist and may (or may not) be borne out.
The enclosed information is current as of 01/10/2022, has been sourced using Russell Investments and constitutes opinion only. The information contained in this email is of a general nature only and your personal financial position, objectives or needs have not been considered. Please ensure you have the necessary financial, tax and legal advice before acting on this information. Do not rely upon it when making financial decisions.