FIG AVENUE INVESTMENTS

Australian economy

Whilst the most recent GDP growth data was a little below expectations, other key indicators such as unemployment and trade continued to run strong. Business and consumer confidence, however, remains low and bankruptcies (including construction company collapses) are of growing concern¹. 

International economy

The US Federal Reserve raised interest rates in December by another 0.5%, now up to 4.5%. These rates are the highest in the developed world and indications are that more hikes are instore throughout the first half 2023. The UK, EU and Switzerland also raised rates by 0.5% (to 3.5%, 2.5% and 1% respectively), while Japan remains the only country left with a zero-rate policy¹. 

Investment Markets

It was a difficult end to a difficult year for markets. The Australian share market continued to be hit the least finishing 2022 with a fall of about 3% in December and 5% for the full year. Most other markets were down about twice as much over both periods with the Aussie market likely getting a boost from a depreciating currency². The US market has still been the leading equity market over the past 3-5 years, whilst Chinese markets have been one of the worse places for investors to place money owing to large geopolitical events such as unrest in Hong Kong and China's zero-Covid policy.

Outlook

In Australia, all eyes will be on the December quarter inflation figures out in late January, which should provide guidance on when the RBA is likely to pause the current rate hiking cycle. A decent drop should be enough for the February rate meeting to be the last hike for at least a few months, whilst high inflation numbers are likely to cause enough for concern for the RBA to continue for a bit longer.

S&P/ASX200 - 12 months to 31 December 2022