“When reality set in the market caught up to the rest of the world and fell out of bed.”
Amir said that until inflation and interest rates stabilise, market volatility will continue. That, in part, is due to inconsistent messaging from the Reserve Bank.
“They said the inflation rate will peak just under 8 per cent this year – but last year they said they wouldn’t be rising interest rates until 2024 … There is this kind of false illusion that inflation has peaked – we’re very cautious knowing what the RBA is capable of.”
Commsec market analyst James Tao said that despite interest rates being set to increase until the end of the year, the pace of those rises could slow by December.
“There is obviously a bit of a lag effect in terms of interest rate rises and how it impacts consumer spending habits,” he said. “When you see interest rates rising on your home loans, it certainly eats into any discretionary spending that you had before. We aren’t really seeing wages keep up of course with how costs are rising at the moment. So that inflation battle continues to wage on.”
“It’s all comes down to how aggressive central bank’s going to be to battle inflation. Is it going to be a soft or hard landing for economies? And of course, the harder the landing, the worse the companies will perform in.”
Meanwhile, despite the energy sector slumping, coal companies were some of the day’s best performers. These gains point to an increasing demand for the material, as global mandates to phase fossil fuels out have resulted in a dwindling supply.
Tech stocks continued to deepen their losses, which Amir says can be traced back to interest rate hikes.
“If you take a look at the three worst performers of the day, they’re all sectors that suffer in high-interest rate environments,” she said. “They’re technology stocks and they’re property groups. Their earnings pull back – and in the future when interest rates rise, the market is again pricing that in. This will continue to happen each time central banks rise rates. ”
Overnight, Wall Street fell lower on Thursday, adding to weekly losses for major indexes as central banks around the world hiked interest rates to fight inflation.
The S&P 500 fell by 0.8 per cent, while the Dow Jones dropped 0.4 per cent and the Nasdaq lost 1.4 per cent. Every major index is solidly on track for weekly losses.
Tweet of the day:
Quote of the day: “The IP address [used by the hackers] kept moving. It’s a sophisticated attack. Safe to say it comes out of various countries in Europe. And in terms of the customer data, I think it dates back to 2017,” Optus chief executive Kelly Bayer Rosmarin said on Friday morning.
“I’m very sorry and apologetic,” she said. “It should not have happened.”