Market Update - 16th November 2024
Written by William Cooper
Interest Rates:
On the 5th of November, the RBA left the overnight cash rate unchanged at 4.35%. Inflation has fallen substantially since its peak in 2022, and more recently declined from the June quarter to the September quarter, from 3.8% to 2.8%. This is attributable to declines in fuel and electricity prices in the last quarter, however part of this decline reflects the temporary cost of living relief. Unemployment has shrunk by an average of 0.4% over the three months leading up to September which has put a dampener on the possibility of rate cuts occurring sooner. The RBA board believes the current policy is sufficiently restrictive and is expected to continue working to bring down inflation to the 2.5% midpoint target.
Domestic:
The performance of the ASX in totality has closely mimicked that of the US, which has seen most Australian indices recording gains. Strongest performers in the ASX were technology, consumer discretionary, and financials which have all risen by 9.7%, 4.91%, and 4.28% respectively. Consumer discretionary has risen in anticipation for the holiday season, as these stocks have historically performed their best at this time of the year.
Losses in energy and materials limited the ASX’s growth, sliding by 3.48% and 5.54% respectively. BHP, Rio Tinto, and Fortescue all tumbled which dragged the materials sector lower. These stocks suffered from lower iron ore prices after lowered Chinese demand for Australia’s mineral exports. Energy stocks have fallen over 10% since the start of October, as oil prices have continued to fall, and are currently settling close to 1-year lows.
US:
The US markets saw significant gains this fortnight with the S&P 500 rising 3.85% for the period. America’s largest indices all experienced 5 straight days of gains following Donald Trump’s election win over Kamala Harris. Trump’s re-election has created a surge in the US and global markets as typical following US Presidential Election cycles. Click here to read more about the relationship between the market and US Presidential Elections.
However, the US markets have declined in the final days of the fortnight, despite the Fed announcing it will cut rates by 25 basis points. This is due to Fed chairman Jerome Powell announcing alongside this rate cut that they will not rush to cut interest rates further. Powell identified, ongoing economic growth, solid job market, and inflation above 2% all are evidence that they are not to rush into any further rate cut decisions. Investors have lowered their expectations of larger rate cuts in 2025 which led to the decline.
