It’s taken this long to accept the reality of the recent Australian Election result.
And with the election “euphoria” rally officially over we can get back to considering some of the real economic issues facing Australian investors right now.
But before we get to the Aussie position, it’s important to reveal some global context.
For the US, as the chart below shows, recessionary winds haven’t mattered, and, by any metric, US markets are a joke overvalued.
Nothing to see here.
During periods of pre-election farce it can be easy for investors to increase “domestic” bias when considering asset allocation, so we’ll do our best to stay “global” in this note, as a reminder of the effect international markets have on Australian investors.
After a horrible final quarter of 2018 for financial markets Global Central Banks resumed their financial system “bailout” and bubble inducing emergency settings that began 10 years ago.
A small rise in rates by the US Fed was all it took for central bankers to stare back into the potential abyss and run back to what they do best, blow bubbles.
So we continue with all the interest rate suppression policies, making it a special time in world history.
In the space of 6 weeks, the US Fed has gone from steady as she goes, 3 rate hikes to go in 2019, to considering policies so extreme that they weren’t used in the greatest financial crisis of the last 80 years.
6 weeks!!
Shredding all remaining market credibility, in our irrelevant opinion. Peter Schiff (Euro Pacific) now likens the US Fed Reserve committee to a bunch of 5 year olds debating how Santa gets all the presents to everyone each year.
Or, so terrified they may be at pricking any one of the prevailing bubbles, they just decided to crank it all up again, like their recent predecessors.
Doesn’t matter. What matters is, by way of recently referencing (US Fed Vice Chair Clarida) the Bank of Japan’s “leadership” in monetary policy, we can assume some of the soon to be announced policies to include:
And what have equity markets thought of all this? They love it.
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