Aspirations Insights : March 2023

Welcome to the second edition of the Aspirations Wealth (AW) Insights for 2023. AW constantly monitor the investment markets and aim to keep our valued clients regularly informed and updated.

USA Recession Probability 

The chart below plots the probability of a USA recession in the next 12 months and next 24 months as implied by market data. Historically, the outlook in the near term becomes more concerning when market expectations of recession rise above the 90% level. Share markets are currently anticipating an economic slowdown and even mild recession. What is not priced into share markets is a severe global recession. 

10 Interest Rate Increases In a Row!

The Reserve Bank of Australia (RBA) confirmed a 10th consecutive rate hike on Tuesday afternoon, as the cash rate was lifted to 3.6%. Governor Lowe flagged more “tightening of monetary policy will be needed” to bring inflation down to the goal range of 2-3%. As of the December 2022 quarter, it was at 7.4%. AW predict a cash rate of 4.1% mid-year with a potential two further 25 basis point hikes, before interest rates are paused. The chart below shows the Australian cash rate for the past 33 years – interest rates are still competitive at current levels vs history. 

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Any advice contained in this update / insight is general advice only and does not take into consideration the reader’s personal circumstances. To avoid making a decision not appropriate to you, the content should not be relied upon or act as a substitute for receiving financial advice suitable to your circumstances. When considering a financial product please consider the Product Disclosure Statement. Aspirations Wealth Group is a Corporate Authorised Representative of Aspirations Private Wealth Pty Limited. ABN 57 622 182 076 – AFSL 503889.

Aspirations Insights : February 2023

Welcome to the first edition of the Aspirations Wealth (AW) Insights for 2023. AW constantly monitor the investment markets and aim to keep our valued clients regularly informed and updated.

Australian Shares

  • The below chart shows the calender year returns from the Australian share market (ASX 200)
  • The grey bar details the return for the full year, while the red dot shows the low point during the year
  • The lesson? Share markets are volatile and you need to stay the course!
  • You will observe that 20 out of 29 years provide positive returns. The average long-term return is around 10% p.a.

Current Outlook & Positioning

We continue to see one of 3 possible scenarios playing out in the US economy over the next 12 months, which in turn will influence the outcomes for most share markets, including Australia.

Stronger-than-expected corporate earnings, a shallow recession or no recession at all, or an earlier-than-expected pivot by the Fed, could strengthen the case for scenario 1 in which shares would most likely rally. The share market rally in January 2023 suggests investors might already be pricing in a scenario 1 outcome.

But worse-than-expected corporate earnings could firm the path to scenario 2 and a full recession which would likely lead to weakness in share assets.

Alternatively, scenario 3 appears to be the least concern for investors at present with inflation expectations priced at very low levels. While highly unlikely in our view, scenario 3 still remains an outside possibility.

Given the uncertainty surrounding central bank policy, economic activity, and corporate earnings, we believe it is too early to know which scenario will transpire. We continue to monitor the evolution of these scenarios which will then in turn impact portfolio allocations and positions. We remain vigilant and willing to make further portfolio adjustments as needed.

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Any advice contained in this update / insight is general advice only and does not take into consideration the reader’s personal circumstances. To avoid making a decision not appropriate to you, the content should not be relied upon or act as a substitute for receiving financial advice suitable to your circumstances. When considering a financial product please consider the Product Disclosure Statement. Aspirations Wealth Group is a Corporate Authorised Representative of Aspirations Private Wealth Pty Limited. ABN 57 622 182 076 – AFSL 503889.