Infinity Portfolio Plus Update December 2024
Broader Market Moves
Key Market Drivers
Share markets finished higher after mixed trading in a Thanksgiving shortened week for the US. Trump’s tariff posts, another elevated inflation reading in the US, and news of a ceasefire between Israel and Hezbollah were a few of the drivers in a week which ultimately saw US shares hit all-time highs. This also closed out a strong month for equity markets, following an upbeat reaction to the US Presidential election.
President-elect Trump announced (via social media) that he will impose additional 10% tariffs on Chinese imports (well down from initial threats of 60%), and 25% tariffs on Mexico and Canada. Linking tariffs to drugs and immigration rather than economics and trade suggests that this may be more of a negotiating tactic, with a deal to be done. Uncertainty continues with respect to growth/inflation risks surrounding aspects of the Trump 2.0 agenda, with many preferring to see what is done rather than what is said.
Energy was the more significant under performer in local markets this week, declining -3.2%. Whilst tensions in the Middle-East didn’t seem to drive sector outperformance, ceasefire announcements appear to be behind a -3.0% decline in the oil price this week. Relative to a more modest -3.6% year-to-date decline in the USD oil price, the sector has fallen -14%, underperforming the ASX200 by almost 30% over this period.
Governor Bullock stated this week that underlying inflation remains too high to consider near term rate cuts, and that labour markets remain tighter than what would be consistent with low and stable inflation. This has seen more economists delay their expectation of first rate cuts until May, consistent with market pricing.
In the US, Minutes from the November's FOMC meeting did little to alter the narrative around the Fed's policy path, with participants expressing broad support for gradually lowering rates. Regarding the labour market, some participants assessed downside risks to the jobs market had diminished.
Economic data out of the US continues to provide broad support to recent Fed comments that there is no rush to cut rates amidst a healthy labour market and solid growth in activity levels. Markets are currently pricing a ~35% probability that rates will be held at the December 18 meeting (47% prior week), and that rates will be 0.8% lower by the end of calendar 2025.
Macro/Economic Newsflow
Whilst headline annual inflation came in better than expected at an unchanged 2.1% for October, this was again distorted by energy subsidies, with trimmed mean inflation rising to 3.5% from 3.2% in September. The RBA is likely to largely look through this data given 40% of the CPI basket wasn’t measured in the month.
The US Fed’s preferred measure of inflation, core personal consumption expenditure (CPE), climbed 2.8% from the prior October (2.7% for September), highest in 6 months. Whilst in line with estimates, together with a labour market which appears to be softening gradually, and other encouraging data around activity levels, this furthers the case for a more gradual and data dependant approach to monetary easing.
The RBNZ cut their cash rate by 50 b.p. to 4.25% as expected, with the accompanying statement flagging further easing in early 2025 (including a further 50 b.p. in February) if conditions evolve as expected. The updated projections are for a year-end 2025 rate of 3.55%, with risk toward neutral rates of 2.5-3.5%.
Total private-sector credit growth accelerated slightly to +0.6% month-on-month in October, with the yearended growth also increasing to +6.1%. This was slightly above expectations (+0.5% mom). Compositionally, year-on-year growth in housing credit was +5.3% (stable), +8.3% for business credit (accelerating), and +2.2% for personal credit (slowing).
Stocks in the News — S&P/ASX 200
Major Share Price Moves — Infinity Portfolio Plus
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