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03-09-19<\/em><\/p>\n From George Lucas, Raiz CEO<\/em><\/p>\n <\/p>\n Firstly, looking at equities, the S&P500 closed last week back near the top of its recent range, with key resistance up near the 2,945 level and the index still within 5 per cent of its all-time high.<\/p>\n This suggests that — taking a step back from market volatility and US President Donald Trump\u2019s recent trade war tweets — that many investors are still not overly worried about the outlook.<\/p>\n One possible explanation for the comparatively limited reaction in equity markets is that investors are still clinging to hopes that the trade war will blow over. However, this position doesn\u2019t look particularly credible anymore given both China and the US have recently doubled down on their positions. An escalation in the trade stoush seems a much more likely outcome.<\/p>\n The second theory is that there are continued hopes among investors that the global economy will be fine, despite the trade war. Admittedly, its direct effects on the rest of the world are likely to be relatively small, but its indirect impact via confidence and investment remains unclear.<\/p>\n The problem with both these analyses is they miss the bigger picture in that the global economy has already lost momentum for reasons not directly related to US-China trade. Data out of Germany this week showing its economy contracting on weaker exports in Q2 is a stark reminder of this.<\/p>\n <\/p>\n Global growth will probably remain weak even with some further easing of monetary policy by the US Federal Reserve later this year. Indeed, Federal Reserve Chairman Jerome Powell\u2019s much-anticipated speech at the Jackson Hole conference hinted that the Fed will cut interest rates at its September meeting, but did little to clarify intentions beyond that.<\/p>\n As it stands, investors expect a further 100 basis points of cuts over the next 12 months, but those projections are almost certain to be revised down at the September meeting. It\u2019s not only investors who have been disappointed by the Fed\u2019s gradual approach, with President Trump repeatedly — and increasingly stridently — calling for much looser monetary policy.<\/p>\n It\u2019s likely that the Fed will cut twice more this year largely on fears financial conditions could tighten if it disappoints market expectations. In saying that, the Fed has never cut by more than 75 basis points in a year outside an actual recession and the US is not currently in a recession.<\/p>\n <\/p>\n Trump — because he is not getting his rate cuts — is now said to be considering further tax cuts. But even if he keeps pushing for them, there\u2019s good reason to think won\u2019t happen. Remember, Democrats control the House of Representatives and won\u2019t want to help Trump in an election year, while Republicans may also balk at increasing US fiscal debt that\u2019s already near 5 per cent of GDP.<\/p>\n <\/p>\n At home, the slowdown in\u00a0Australia’s construction\u00a0industries has ramped up, with new data showing a sharp decline in building work done in Q2. This suggests private investment fell further in the three months to June and lifts the downside risks to GDP growth.<\/p>\n Still on the construction sector, it\u2019s unlikely that rebounding machinery and equipment investment in Australia will be enough to offset the current slump in construction activity. However, Australian firms have revised up their forecasts for future capital expenditure, so the drag from falling investment may ease gradually over the coming quarters.<\/p>\n <\/p>\n <\/p>\n <\/p>\n Download it for free in the App store or the Webapp below:<\/p>\n <\/p>\n <\/p>\n Important Note: <\/strong>The information on this website is provided for the use of licensed financial advisers only. The information is general advice and does not take into account any person’s particular 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 website.<\/em><\/p>\n Investors only:<\/strong> The information in this Document is confidential it must not be reproduced, distributed or disclosed to any other person unless it is part of their statement of advice. The information may be based on assumptions or market conditions and may change without notice. This may impact the accuracy of the information. In no circumstances is the information in this Document to be used by, or presented to, a person for the purposes of making a decision about a financial product or class of products.<\/em><\/p>\n General advice warning: <\/strong>The information contained in this Document is general information only. It has been prepared without taking account any potential investors\u2019 financial situation, objectives or needs and the appropriateness of this information needs to be considered in that context. No responsibility or liability is accepted by Instreet or any third party who has contributed to this Document for any of the information contained herein or for any action taken by you or any of your officers, employees, agents or associates.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" 03-09-19 From George Lucas, Raiz CEO Nervous truce in US, China trade war sees\u00a0equity markets\u00a0up Firstly, looking at equities, the S&P500 closed last week back near the top of its recent range, with key resistance up near the 2,945 level and the index still within 5 per cent of its all-time high. This suggests […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false},"categories":[1],"tags":[],"yst_prominent_words":[1755,2002,298,2104,332,386,947,297,151,940,314,949,2103,1596,166,2105,2106,959,1735,2005]}Nervous truce in US, China trade war sees\u00a0equity markets\u00a0up<\/h3>\n
Powell\u00a0uses\u00a0Jackson Hole\u00a0to hint at Fed rate cut<\/h3>\n
Trump hints at support for more tax cuts<\/h3>\n
Australian construction work slumps<\/h3>\n
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