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Week in review...

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Global Markets

  • Equities Surge:
    Global equities experienced a robust rebound last week, driven by Donald Trump’s US Presidential victory and the Federal Reserve’s 0.25% rate cut. Despite concerns, long-term bond yields eased, and the US dollar strengthened.

  • Political Implications:
    Trump’s victory highlighted the effectiveness of focusing on key voter concerns—primarily the economy and immigration—over issues like democracy and reproductive rights emphasized by Harris/Biden. His strategic approach mobilized significant support from younger, non-white, and non-college-educated voters, defying poll predictions.

    The Republican Party appears poised for a "clean sweep," securing Senate control and potentially the House of Representatives. Investors are now assessing the impact of Trump’s proposed policies:

    • Market-friendly: Tax cuts and deregulation.

    • Market risks: Tariff hikes and potential trade wars.

  • Federal Reserve Outlook:
    The Fed cut rates by 0.25% as expected and signaled a cautious approach to Trump’s policies, delaying responses until clear economic impacts emerge. Another rate cut in December remains on the table but depends on forthcoming data, particularly inflation and growth metrics.

  • Upcoming Focus:

    • Trump’s policy priorities—tax cuts could boost markets, while trade wars might create headwinds.

    • The US Consumer Price Index (CPI) report (Wednesday) will be critical. Expectations are for core CPI to rise 0.3%, keeping annual inflation steady at 3.3%. Markets are watching rental prices, which could signal future easing in inflationary pressures.

Australian Market

  • Local Stocks Rally:
    Australian equities benefited from the global “Trump bounce,” even as the Reserve Bank of Australia (RBA) continues to downplay immediate rate cut prospects.

  • RBA Insights:
    The RBA maintained its cautious stance, waiting for inflation to decline significantly before making a move. A rate cut in February remains plausible but hinges on favorable Q4 CPI data due in late January.

  • China’s Influence:
    Markets were disappointed by China’s lack of major fiscal stimulus, despite hopes that Trump’s trade policies might push for a stronger response. The absence of aggressive measures adds to uncertainty.

  • Economic Indicators to Watch:

    • Sentiment Surveys (Tuesday): Updates from NAB (business sentiment) and Westpac (consumer sentiment) are expected to reflect modest improvements but subdued overall confidence.

    • Labour Market Report (Thursday): Employment growth likely to align with population growth, maintaining a steady unemployment rate of 4.1%. This may reinforce the RBA’s inflation-first focus.

Key Takeaways for Investors

  1. Global Dynamics: Equity markets are balancing optimism around tax cuts and deregulation against concerns about tariffs and inflation under Trump’s policies.

  2. US Inflation Watch: The CPI report will shape expectations for future Fed decisions.

  3. Australian Caution: The RBA remains on hold, with a February rate cut contingent on inflation data. Modest local sentiment and employment growth reflect a steady but uninspiring economic environment.

  4. China’s Role: Delays in fiscal stimulus from China could temper optimism in the Asia-Pacific region.

Investors should monitor policy signals from Trump’s administration, US inflation data, and RBA commentary for further direction.

Rick Maggi CFP, Financial Advisor Perth, Westmount Financial

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Disclaimer
This document has been carefully prepared by Westmount Securities Pty Ltd (ABN 42 090 595 289, AFSL 225715) for general information purposes only. However, neither Westmount Securities Pty Ltd nor any of its affiliates guarantee the accuracy or completeness of any statements contained herein, including any forecasts. It is important to note that past performance is not a reliable indicator of future outcomes. This material does not consider the specific objectives, financial circumstances, or needs of any particular investor. Therefore, before making any investment decisions, investors should assess the relevance of this information to their individual situation and consult professional advice, taking into account their unique objectives, financial position, and needs.