The Roadmap: September 2023

Roadmap Read time 4mins
13 Sep 2023
Now Reading: The Roadmap: Cautious Optimism

The economic outlook remains fascinating. Economies around the world have proved remarkably resilient to the sharpest tightening in monetary policy in a generation. Consumers have high accumulated savings and are enjoying record job creation and strong wage growth. A massive investment wave is also underway on electric vehicles, manufacturing relocation, defence spending and clean energy.


The global inflation threat has eased, allowing central banks to slow down rate rises. The result is much better economic outcomes than expected at the year’s start. Stock markets bounced based on this news and excitement about the emergence of Artificial Intelligence.

The question now is whether investors got too carried away as several risks are still hovering in the background. Inflation concerns could reappear, with a rise in wages the biggest consideration. Geopolitical tensions remain high around Russia and China. Some financial strains have emerged in US banks, and the Chinese property sector is under pressure.

In Australia, inflation risks are now greater than in many other countries, given jumps in electricity prices, rents and wages. Australian households are also more vulnerable to rate rises given high levels of debt and the rollover from fixed to variable rate loans.

All this suggests a broad range of potential outcomes over the next year. Economies may stay strong and boost earnings, or these risks could escalate.

Overall, equities have become less attractive because indices have already run hard, making them more vulnerable to some of the macro risks. Investors should consider having well diversified and defensive portfolios and continue looking for opportunities created by future volatility.

On a brighter note, the jump in interest rates will generally boost returns in interest rate securities and create significant opportunities in this asset class.

Stay close to your adviser as this highly unusual backdrop plays out, to help navigate opportunities as they arise.

Tim Rocks
Chief Investment Officer


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