Catching up

From last Friday (ancient history now) we had the US payrolls data. Our quick observation: payrolls are running quite close to the average of the last 10 years, and are approaching that average from above.

That raises the prospect of an overshoot, particularly if monetary policy stays tight (i.e. a cash rate comfortably above 5%).

The unemployment rate moved to 4.1%, and has steadily risen for some time now, even as inflation is at or near the Fed’s target.

If inflation has dropped by 2% of so since the last rate hike, and the unemployment rate has risen by 50bps (or so) since the last rate hike, surely it is then past time to now begin tickling the rate down.

Overnight we get US CPI, and a soft outcome here will open the door to the August cut. We’ve been head-faked a few times, and predicting inflation has been notoriously difficult for just about everyone (certainly so on a “month to month” type time frame) and it’s possible Friday will simply prove to be a “back to the drawing board” kind of month.

But overall, I think it is still very much goldilocks, however that rosy scenario absolutely requires the Fed to agree, and to begin the cutting cycle. If they don’t, the porridge will go cold, and we’ll all be miserable.

Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.

This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.

Please note that past performance is not a reliable indicator of future performance.

General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.

Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.

Receive our investment insights

Something went wrong. Please check your entries and try again.