FIG AVENUE INVESTMENTS

Australian economy

The current government would be pleased that economic conditions leading up to the next election look reasonably strong. GDP remains slightly above trend and unemployment is low¹. Inflation, however, remains at uncomfortable levels, with more and more attention being paid to the rising cost of living.   

International economy

Whilst an escalation in conflict has kept market participants anxious, all eyes are fixed upon the interest rate settings of the US. The Fed has started its quantitative tightening process and has now begun to also raise cash rates (with rates being lifted up to 0.50% at the March meeting).¹ One economy that is declining significantly is that of Russia. Sanctions are in place that are likely to reduce the size of the Russian economy considerably and the once proud nation is likely to have an economy smaller than that of Australia, Mexico or the US state of Florida.

Investment Markets

Australian and US equity markets were top performers for the month of March, both up over 5% for the month and rebounding well from recent lows. European shares were subdued by the ongoing threats from war at its borders, whilst Chinese equities remained near 2-yr lows. In the world of bonds, both Australian and US 10 year yields are heading above that of Chinese yields, highlighting the pivotal environment faced by investors².

Outlook

Domestically, and with an election looming, market participants will be looking for signals relating to economic stimulus and overall policy settings. Much of this is overshadowed by the ongoing effects of the pandemic and the impact of war in Europe, most notably to supply chains and the rising cost of goods and services. Uncertainty looms large and volatility is likely to remain high.

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