For about 2 years, we have expressed a view that US recession risks were low until late 2024 or early 2025. We are now amidst this period where interest rates remain restrictive whilst economic insulation has largely been exhausted.
The irony of market optimism over the last quarter is the rapid tightening of financial conditions it has produced. Financial conditions are around the tightest they have been since the eve of the GFC. We explore what this might mean for 2025 in our quarterly. We aren't trying to make a forecast, but we are trying to characterise risk.
For 2025, the best offense might just be a good defense
A volatile quarter, with markets at all-time highs, whilst leading indicators remain weak. Unusually, a super-sized rate cut from the Fed, in the absence of a crisis, can be read in one of two ways:
A commitment to achieving a soft-landing
Deepening concerns of weakness in the labour market
This quarterly unpacks:
The volatile quarter that was
China's economic malaise
A run through of leading US labour market indicators
The case for a soft-landing
A focus on Australia and the outsized role of Government spending
Investment comments and positioning.
Please reach out with any questions or comments.
The probability of recession arising, and inflation re-accelerating have both being revised up, discussed in full within our economic update. This quarter we also take a walk down memory lane, looking at similarities to 1948 and offer up some killer dinner party conversation fodder... the 'kinked Phillips curve' framework, in our deep dive into labour markets.
The final quarter of 2023 saw markets firm on a soft landing outcome, with a rally in equities and a pricing of interest rate cuts in 2024. Disinflationary forces have seen Central Banks make remarkable progress in returning inflation back towards target. Might this be the goldilocks outcome Central Bankers hoped for and #markets thought impossible just 12 months ago?
This Quarterly discusses the two competing economic scenarios and the key data points that help inform our views on the outlook for 2024. We finish off with a run down on investment positioning, pockets of potential value and our favourite graph from 2023.
Russia’s invasion has accelerated the schedule of central bank tightening. Markets are now pricing ten 0.25% rate rises by the United States Federal Reserve in 2022.
Large parts of the Chinese economy are in some form of lockdown. China’s central bank is lowering interest rates while the West is raising interest rates. Capital flows out of China are accelerating.
Inflation risks are on the upside, although interest rates are rising, they mightn't rise as high as expected.
Capital allocations to price setting business and real assets are an investor’s best protection from inflation.
This Quarterly edition from Snowgum Financial Services provides you with an eight minute summary of matters to do with the economy, investing and markets.
Our quarter one economic and investment update does the silliest thing in finance... makes predictions about the future of certain industry. A light read touching on a variety of topics and hopefully making you excited to be an investor.
Our quarterly snapshot of key economic, investment and sector themes. Three stock to watch and a BREXIT special update. We also look at two of Snowgum's latest policy submissions.
