Australian Economy – Spending on homes and retail goods are providing the economy with some stability in the midst of the continuing manufacturing slump and unemployment worries. Hopes that the worst may be behind us has seen confidence start to tick up, though evidence of a rebound is weak at best.
Global Economy – January saw the start of QE tapering by the Federal Reserve, as they farewelled Bernanke. Also, the recent disfunction on the US Congress may be subsiding with new budget deals reached well before any deadline and POTUS declaring that he will go it alone on key reforms such as increasing the minimum wage. Across the Atlantic, mostly good data out of Europe has helped the likes of Spain and Ireland issue new debt at low rates. And further East, Chinese growth figures continue to be a worry as manufacturing activity slipped back into contraction.
Investment Markets – A poor start to the year with most markets retreating. Australia, US and Europe all saw falls of around 3% and Japan's stellar 2013 (+57%) was chopped into with the Nikkei down over 8% in the month.
Outlook – The correction that most were expecting at some stage saw mild sell-offs on global markets in January. However, there still does not seem to be any major dark clouds on the horizon. China's shadow banking system is showing signs of weakness, with a $500m bailout recently needed by the Government. Also, emerging markets seem to be feeling the pressure of an increase in currency and capital market volatility, with political instability beginning to raise its head. But such worries don't seem likely to create any short-term crisis and at worst will see politicians doing what they do best - procrastinating (and perhaps lying).
S&P/ASX 200 – 12 months to 31 January 2014
Source: Core Equity Services