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Australian economy

Whilst inflation is still relatively high, the RBA seems to be in a bit of a holding pattern for now. This is even though the labour market is also reasonably tight and overseas counterparts continue to stretch relative interest rate spreads¹. 

International economy

Advanced GDP growth figures out of the US point to an economy that is keeping its head above water with relative ease. This is why the Federal Reserve has continued to keep interest rates moving upwards despite inflation dropping close to comfort levels. One of the bigger surprises over the past few months has been the very weak Chinese economy, with concerns growing regarding the country's ability to avoid the dreaded 'middle-income' trap¹. 

Investment Markets

July was a good month for equities with most of the world's stock market boards flashing green. The Australian market was up about 3%, whilst Japanese and European markets were a little more flat. After a difficult start to 2023, Chinese equities had a good July, bouncing back over 4%². 

Outlook

With inflation subsiding in most regions (China saw price drops in their latest reading) attention is now turning to rate cut expectations. With labour markets remaining tight, the need for a reversal of the recent hikes seems redundant, but bond markets are still pricing in some steepish cuts over the next 180 months.

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