Bassanese Bites: Promising start – Week beginning: 04 March 2019

Global equities posted further gains last week on the back of very dovish Fed commentary, capping off what’s been a promising start to the year so far.  Indeed, global equities returned 7.3% in local currency terms in January after posting a loss of 7.2% in December.  Australian equities returned 3.9%  with solid gains across most sectors apart from financials, with the latter still being weighed down by slowing credit growth and fears of what may emanate from today’s release of the Hayne Royal Commission findings.

More broadly global equities are benefiting from several positive developments since the dark days of late last year. For starters, the US Fed has been obviously shell shocked by the market rout last year (partly caused by it’s own clumsy statements) and appears likely to hold rates steady at least for a few more months.  My base base is that the next Fed move will not be until June, though two rate rises still seem likely this year given the ongoing solid momentum within the economy (as evident from Friday’s payrolls report). The Fed also seems likely to announce in coming months that its balance sheet reduction program (i.e. not replacing maturing bonds) could be completed by year-end.

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