Global Market Outlook
Global Markets at mid-year 2024 are priced for no-recession soft landing in the U.S., but mixed data signals are delaying central bank rate cuts. This creates some risk of harder landing in late 2024/early 2025. There is still no clear answer to this year’s key question: is the U.S. economy headed toward a no, soft or hard landing?
We see plausible reasons why any of these scenarios are possible.
Just as last year’s investor pessimism was overdone, we worry this year’s optimism could eventually prove to be excessive.
Credit: Andrew Pease, Chief Investment Strategist, Russell Investments.
Domestic Market Outlook – Australia and New Zealand
Australia remains on the narrow path of avoiding recession. The consumer is under stress from the increases in the Reserve Bank of Australia’s (RBA) cash rate and variable rate mortgage interest rates. Consumer spending has slowed materially. Tax cuts will start on July 1. It is unlikely that all the increase in disposable income will be spent, but it may provide some support, particularly to lower-income consumers. Improvement in Chinese economic activity will also be supportive.
The inflation pulse in Australia lags the rest of the world by about six months (due to a later reopening from the pandemic lockdowns), and so the RBA will likely lag major central banks to reduce rates. Our current base case is for a cut in November, but there is growing risk that the RBA may stay on hold until early 2025.
New Zealand’s economy has contracted in three of the last four quarters, illustrating the pressures that the economy is facing following the aggressive action from the Reserve Bank of New Zealand (RBNZ). The outlook remains challenging, with credit growth still soft and a large current account deficit. Despite the unemployment rate having risen more than 1% from its low, wage pressure has not abated yet. This leaves the RBNZ in an uncomfortable position. We expect that the RBNZ will commence cutting rates after the U.S. Federal Reserve.
AFM Endowment Fund Performance Report (as at 31st December 2024) continues to outperform its Investment Target Rate (CPI + 5.0%), with an outstanding result exceeding the benchmark once again, check out the latest Performance Report. AFM is open to wholesale investors within its ASIC ID Statement Instrument for Churches, Charities and Schools. Call us to inquire on 1300 059 305.
The team at AFM would like to wish you a Happy and Prosperous New Year as you continue to steward resources entrusted to you.
As 2024 comes to a close, I want to take a moment to acknowledge the incredible work of investors, donors, and organisations in the community and not-for-profit space. Your dedication to stewarding capital for meaningful programs transforms lives and strengthens communities.
As we step into 2025, may your efforts continue to create impact, inspire change, and build a future filled with hope and opportunity for those who need it most. Here’s to another year of collaboration, innovation, and purpose-driven investment!
Wishing you all success and sustainability in your missions for the year ahead.
AFM Team
1300 059 305
www.anglicanfundsmanagement.com.au
Global Market Outlook
Global Markets at mid-year 2024 are priced for no-recession soft landing in the U.S., but mixed data signals are delaying central bank rate cuts. This creates some risk of harder landing in late 2024/early 2025. There is still no clear answer to this year’s key question: is the U.S. economy headed toward a no, soft or hard landing?
We see plausible reasons why any of these scenarios are possible.
Just as last year’s investor pessimism was overdone, we worry this year’s optimism could eventually prove to be excessive.
Credit: Andrew Pease, Chief Investment Strategist, Russell Investments.
RBA Rate – Announcement April 2025 meeting
The Reserve Bank of Australia kept the cash rate unchanged at 4.10% at the April meeting. The board continue to believe that monetary policy is restrictive, however are cautious on the forward path of inflation. The board stress that uncertainty is elevated, particularly around global trade policy, and that they are closely monitoring these developments. The market expects that an interest rate cut in May is more likely than not.
Domestic Market Outlook – Australia and New Zealand
Australia remains on the narrow path of avoiding recession. The consumer is under stress from the increases in the Reserve Bank of Australia’s (RBA) cash rate and variable rate mortgage interest rates. Consumer spending has slowed materially. Tax cuts will start on July 1. It is unlikely that all the increase in disposable income will be spent, but it may provide some support, particularly to lower-income consumers. Improvement in Chinese economic activity will also be supportive.
The inflation pulse in Australia lags the rest of the world by about six months (due to a later reopening from the pandemic lockdowns), and so the RBA will likely lag major central banks to reduce rates. Our current base case is for a cut in November, but there is growing risk that the RBA may stay on hold until early 2025.
New Zealand’s economy has contracted in three of the last four quarters, illustrating the pressures that the economy is facing following the aggressive action from the Reserve Bank of New Zealand (RBNZ). The outlook remains challenging, with credit growth still soft and a large current account deficit. Despite the unemployment rate having risen more than 1% from its low, wage pressure has not abated yet. This leaves the RBNZ in an uncomfortable position. We expect that the RBNZ will commence cutting rates after the U.S. Federal Reserve.