Australian Economy – Overall data for the month was on the soft side with job numbers weak (even with unemployment rate falling), trade deficit widening and consumer confidence waning. As a result, the RBA has started to position itself for a round of interest rate cuts as long as inflation stays low.
Global Economy – QE3 was the big news of the month with the US Fed vowing to continue to provide stimulus for as long as it takes to get the unemployment rate down to acceptable levels (read 5-6%). With China also announcing large stimulus measures, all the top economies have now moved into a phase of unprecedented global monetary easing with the hope of a sustained economic rebound before inflation starts to become a major issue. Breakaway states in Europe (particularly Catalonia) show that the Euro may even be dysfunctional right down to the local level, and with more austerity measures coming into force public unrest will continue.
Investment Markets – Markets like QE and September was no exception with expectations of stimulus fulfilled. China saw a good bounceback of around 4% while most everywhere else saw equity returns of between 0.5% to 3%.
Outlook – Obama-vs-Romney will dominate most of the headlines this month, but markets may not be pricing too much into either result. QE may open the floodgates, but other than temporarily pushing up equity and commodity prices, not much might change. And with social unrest increasing, markets may soon start demanding structural, rather than cosmetic, improvements.
S&P/ASX 200 – 12 months to 30 September 2012
Source: Core Equity Services