Australian Economy – According to the most recent Westpac-Melbourne Institute Leading Index score, the Australian economy is set to continue its rate of modest growth for the next 3-9 months, and perhaps even accelerate. A small jump in the unemployment rate to 5.5% presents a slight conflict to this picture, but this was likely driven by an increase in the labour participation rate1.
Global Economy – The U.S. Federal Government went into its first full-scale budget shutdown of the Trump presidency. But on the economic front, activity continues to show mild strength. Inflation in the U.S. remained steady for the month, though pressures on employers and wages seems to be growing2. Inflation in Europe also seems to be picking up, whilst the unemployment rate remains high, but trending downwards, at 8.7%.
Investment Markets – Following a good 2017, most equity markets had a solid start to year. Hong Kong was up almost 10%, while China and the U.S. jumped about 6%. The market euphoria was not felt in Australia, however, with the local bourse finishing slightly down for the month3.
Outlook – With equities peaking in late January, most market participants might be expecting a pick-up in volatility as corrective influences set in. Other than possible overexuberance, there still seems to be a lack of clear warning signals for markets, which may see the current upwards trend in equity prices continue, though at a much slower pace..
S&P/ASX 200 – 12 months to 31 January 2018
Source: Core Equity Services
Footnotes: 1. Australian Bureau of Statistics; 2. US Dept of Labor; 3. Bloomberg data.