Market Update - 9th March 2024
Written by Brad Laird & William Cooper
Domestic:
The latest economic growth figures certainly weren’t pretty, with Australia reporting 0.2% growth in the December quarter and 1.5% growth year-to-date. Apart from COVID, this is the lowest rate of growth since the dotcom crash of 2000. Most importantly, the growth shows that the RBA’s 13 rate hikes are achieving their intended effect. Examples from around the world support the concept that the economy and the markets are not necessarily positively correlated. While Japan slipped into a recession, its equity market reached levels not seen in 35 years, and the Euro Stoxx index hit a record high despite the region ending with 0 GDP growth. Australia’s lack of growth is no reason to avoid investing, and with easing inflationary pressures and stage three tax cuts on the horizon, households should start to see the light come the end of 2024.
On the ASX, the financial, IT, and real estate sectors led growth over the past fortnight, while consumer staples continue to struggle. The retail sector mostly outperformed expectations, but continued rate hike pressures and cautious consumers are restricting the growth of this sector. The IT sector (no surprises) was again a major leader in growth, with continued AI demand leading to the gains.
The gold mining division of the ASX is subtly growing, with gold prices hitting an all-time high. The price of the commodity has grown 5% over the last fortnight and is up 19% year-to-date. Although not having the market cap to make any real impact on the entire market, ASX-listed gold miners are currently reaping the rewards.
International:
Over in the US, February saw the S&P 500 reaching new record levels on eight occasions, culminating in a 5.2% increase for the month. This extension of gains brings the index's four-month streak to a remarkable 21.5% cumulative increase, with all sectors contributing positively.
The S&P 500 companies have reported an average earnings growth of 4.0% year-over-year, marking consistent financial performance across two quarters. The communication services sector, in particular, showcased notable gains, highlighting sectoral strengths in the broader market.
The U.S. saw a moderation in inflation rates, with the Personal Consumption Expenditures Price Index indicating a 2.8% increase, aligning with expectations, and signalling a deceleration in price rises since March 2021.
Inflation rates in the eurozone witnessed a slight decrease, moving towards more stable levels, albeit core inflation remains elevated, underscoring ongoing economic challenges within the region.
The upcoming labour market report is highly anticipated, following a strong job creation performance in January, with expectations set on whether this positive trend will persist, highlighting the labour market's resilience.
