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Australian economy

Whilst the calling of a federal election might be big news on the social front, Australian economists are much more focussed on what is happening with inflation and interest rates. In this regard, prices are rising stronger than has been seen for more than a generation (excluding the GST introduction blip), fuelled by supply chain issues, oil disruptions and a tight labour market¹. Whilst most other indicators look healthy, hiccups in key parts of the economy, including construction industry activity and consumer spending, are starting to raise concern levels.   

International economy

The US Fed has responded to high inflation with the beginning of a series of expected interest rate hikes. This comes at the same time as the US economy is starting to falter with advanced readings for the March quarter GDP showing a negative reading for the first time since the pandemic began¹. Lockdowns in China and war in Ukraine is pushing the entire globe towards the brink of a global recession with much of world suffering with fast increasing prices.

Investment Markets

The US share market has led the way with large falls in April, largely thanks to the collapse in the prices of megacap stocks. Over the month, US shares were down almost 10%, whilst European and Japanese equities were down around 3%. Australian equities were amongst the better performers, finishing the month down only 1%².

Outlook

The ongoing pandemic and Ukraine invasion have markets on edge. Further Russian sanctions are likely, including the banning of energy deliveries to Europe, all of which will lead to a further hit to supply chains and global production. The current market correction could turn into more significant falls should there be an escalation of the current conflict that drags in Russian or Ukranian allies.

S&P/ASX200 - 12 months to 30 April 2022