FIG AVENUE INVESTMENTS

Australian economy

Australia's unemployment rate rose to 3.8% in the past month, giving the central bank perhaps some pause for thought after they raised rates again in May. Wage data released in May has shown relatively strong growth over the past year, but well behind the rate of inflation signaling a real drop in wages¹. 

International economy

Inflation in the US has moderated back down below 5% (yoy), whilst the unemployment rate has started to move back up. Even so the US Federal Reserve still decided to push rates up to back towards 20-yr highs. In Europe, inflation is also dropping slowly, whilst the unemployment rate continues to push lower. This is against the backdrop of very low economic growth, with much of the continent suffering from stagflation (high inflation, high unemployment) like conditions¹. 

Investment Markets

It was a mixed bag across global equity markets. Australian and European stocks fell backwards in May, whilst US stocks gained marginally over the month. Japanese markets, which have been one of the best performing markets over the past few years, had a strong month, jumping over 7%². 

Outlook

With economic indicators softening over the recent past in the US, Europe and Australia, it is becoming more likely that we are coming to the end of this period of significant and swift rate hikes. The next question then becomes "When are rates likely to start coming down?" and this question is much less answerable. This will largely depend upon on inflation dropping back down into comfortable ranges, which might be sped up if we see economic growth reverse and unemployment jump significantly.

S&P/ASX200 - 12 months to 31 May 2023