Undecided election leads to an undecided market
The
focus of the Australian market is on the result – or rather lack of result –
from the weekend’s federal election. It appears the most likely outcome is a
hung parliament although we may have to wait some time until we know for
certain. Unfortunately, the Australian Electoral Commission has made it clear
that it won’t begin counting any more votes until Tuesday, leaving buyers and
sellers in an information vacuum.
“Such
uncertainty is never good for markets…. However, the Australian economy remains
strong.”
As
the possibility of a hung parliament looms closer, the financial market grows
more and more uncertain. Additionally, the prospect of the second hung
parliament within three years escalated speculation the governments AAA-credit
rating will come under pressure in the coming weeks.
Such
uncertainty is never good for markets, and traders may have to wait a month or
even longer to start to get a picture on who will be forming a government for
the next three years. However, the Australian economy remains strong. We do
expect international money flows into our market will slow until the election
outcome is known.
“If
Brexit taught investors anything, at times of such economic uncertainty it is
important to remember the golden rule; do not panic!”
Australian
Chamber of Commerce and Industry boss James Pearson believes it’s very likely
that whoever does form government will now have to build strong relationships
with crossbenchers “to get things done.” Sometimes a minority government can
implement a higher level of discipline and ultimately work better.
If
Brexit taught investors anything, at times of such economic uncertainty it is
important to remember the golden rule; do not panic! Much to the surprise of
market participants, equities and bonds have recovered most of the losses they
experienced in the wake of the Brexit vote.
Additionally,
The Reserve Bank is observing all of this unfold, potentially intervening with
an interest rate cut on Tuesday, although economists think this is unlikely. We
are also expecting a 0.5% month on month rise in retail sales reflecting a
sustained rebound in consumer confidence following the RBA’s decision to cut
interest rates in May.
Important Information
The information on this website is general advice only. This means it does not consider any person’s investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the Raiz product.
The information in this website is confidential. It must not be reproduced, distributed or disclosed to any other person. The information is based on assumptions or market conditions which change without notice. This will impact the accuracy of the information.
Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz.
Past return performance of the Raiz product should not be relied on for deciding to invest in Raiz and is not a good predictor of future performance.
