Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Register

22 February 2025

Home / White Papers 2023

The great impasse

  •   VanEck
  •   6 April 2023
  •      
  •   

Highlights

Australia the sweetest spot 

  • We continue to expect the RBA to increase the cash rate by 25bps at today’s meeting, to 3.85%.  The labour market and inflation have slowed only modestly meaning additional tightening is still needed.
  • Australia will be the lucky country again – just. While Australia faces some significant risks, China’s policy shift away from COVID zero and the RBA getting a significant amount of tightening in before wages had a chance to take off both mean Australia could avoid a recession.
  • If China can pick up pace and Australia can skirt a property/credit implosion, the Australian dollar could do well, particularly against a sliding US dollar. An easing of China trade sanctions will be icing on the cake.
  • While the housing market and consumer sentiment have looked a little more stable of late, this is still the “phony war” as the impact of rising rates has yet to fully hit households, with more significant impacts likely to be felt from March onward.
  • The Australian consumer staples sector has outperformed its global counterparts by almost 3 per cent over the past quarter reflecting the resilience of the Aussie consumer in the face of 10 consecutive rate hikes.
  • When the RBA does pause rate increases we expect a broad rally. Consumer discretionary names like JB Hi-Fi should benefit as consumers have a bit more breathing room in their budgets.
  • We continue to think investors should focus on liquidity, focus on balance sheets and cash flow and avoid highly volatile and speculative assets. We continue to see support for gold.

Gold is being turbocharged

  • Gold has been playing beach ball under water held down by rising US real rates. But geopolitics, crypto uncertainty and financial fears are now turbo-charging it.
  • Geopolitics is a secular support for gold. The retreat of globalisation, the rise of aggressive blocs of nations and the weaponisation of banking and payment systems has seen a fracturing of the US dollar consensus. In turn, central bank gold purchases have been rising sharply.
  • Recent movements in yields have also been supportive of gold. In the previous three instances when the short end of the US curve fell from its peak, gold prices rose for a sustained period.
  • The market is ignoring the negative effect of sustained higher rates on the global financial system. Interest expense will become a significant problem as record levels of debt across the globe are impacted by higher rates. This increasing debt burden, combined with an economic slowdown and sticky, elevated inflation are supportive of gold prices in 2023 and longer term.

Emerging markets are thriving, not surviving

  • One of the bright spots on global markets over the past few weeks has been emerging markets bonds, particularly selected local-currency bonds, which is almost exhibiting signs that it’s a safe haven asset in the current market environment.
  • Emerging Markets generally have low debts and deficits, independent central banks solely focused on inflation, and benefit from China’s reopening and are well-supported commodity prices.
  • In a world running from unsafe finance to safe finance, EM banks are generally deposit funded, not loan-funded, and have high common equity-to-assets ratios.

Download the full paper

 


 

Leave a Comment:
Firstlinks is sponsored by:
banner

Most viewed in recent weeks

Retirement is a risky business for most people

While encouraging people to draw down on their accumulated wealth in retirement might be good public policy, several million retirees disagree because they are purposefully conserving that capital. It’s time for a different approach.

The perfect portfolio for the next decade

This examines the performance of key asset classes and sub-sectors in 2024 and over longer timeframes, and the lessons that can be drawn for constructing an investment portfolio for the next decade.

UniSuper’s boss flags a potential correction ahead

The CIO of Australia’s fourth largest super fund by assets, John Pearce, suggests the odds favour a flat year for markets, with the possibility of a correction of 10% or more. However, he’ll use any dip as a buying opportunity.

The challenges with building a dividend portfolio

Getting regular, growing income from stocks is tougher with the dividend yield on the ASX nearing 25-year lows. Here are some conventional and not-so-conventional ideas for investors wanting to build a dividend portfolio.

How much do you need to retire?

Australians are used to hearing dire warnings that they don't have enough saved for a comfortable retirement. Yet most people need to save a lot less than you might think — as long as they meet an important condition.

Welcome to Firstlinks Edition 594 with weekend update

It’s well documented that many retirees draw down the minimum amount required and die with much of their super balances untouched. This explores the reasons why and some potential solutions to address the issue.

  • 16 January 2025

Latest Updates

Investment strategies

UniSuper’s boss flags a potential correction ahead

The CIO of Australia’s fourth largest super fund by assets, John Pearce, suggests the odds favour a flat year for markets, with the possibility of a correction of 10% or more. However, he’ll use any dip as a buying opportunity.

9 ways to fix Australia's housing crisis

Decades of policy failure have induced a fall in housing affordability. Unless painful changes are made, an underclass will emerge in a society that is supposed to boast the one of the world's highest standards of living.

Shares

Australia: why the chase for even higher dividend yields?

Australia boasts one of the world's highest dividend yielding sharemarkets, providing substantial benefits to investors and retirees. Despite this, individuals often stretch for even more yield, to their detriment.

Shares

MIGA – Make Income Great Again

The Australian sharemarket seems to be rewarding a number of unprofitable companies on the promise of future riches. Yet profits and cashflows still matter, as a recent case study of Domino's Pizza shows.

Shares

Mapping future US market returns

Exceptional returns from the US sharemarket over the past decade have driven by sales growth, margin expansion, rising valuations, and dividends. Predicting future returns requires careful consideration of these factors.

Shares

Read this before you go all in on US equities

US equities rule global markets, but history is littered with examples of markets that seemed invincible — until they weren’t. Diversification will be key for investor portfolios going forwards.

Property

What impact would scrapping stamp duty have on housing?

Increasing house prices pose challenges for housing affordability. This investigates the impact of stamp duty on the property market, and how removing the tax could help address several key issues.

Sponsors

Alliances

Site Map

About Firstlinks

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.