According to the World Gold Council the average annualised inflation adjusted return for gold during periods of stagflation is 32.2%.
Australian Share Market (ASX200) – up 1.60% and snapping a 2 week losing streak that had sent the local market to 18 month lows. Offshore leads were positive with US equity markets bouncing back strongly from the recent oversold levels. The week was very light on in terms of company earnings and data releases but there did appear to be a slight change in narrative following the last few months, and the last couple of weeks in particular, that have seen large upgrades to inflation and interest rate hike expectations with some noticeable rotations during the week. Recession talk gathered momentum following the US Federal Reserve Chair’s semi-annual testimony to congress which provided support for the cohorts of equities which had been battered over the past 6 months as inflation and interest rate expectations have surged. With recession risks increasing due to the aggressive central bank rate hikes there was a rotation back towards more defensive sectors such as Consumer Staples while commodities such as oil and copper sold off on the lower global growth estimates with the Energy and Materials sectors seeing some profit taking after being amongst the best performing sectors year to date. With a lowering growth outlook, some hope emerged that central banks won’t be able to hike rates as much as is currently feared with bond yields tumbling as Australian bonds saw their biggest weekly advance in a decade. The lower bond yields saw the high P/E sectors such as Info Tech leading the gains last week. The Info Tech sector is by far the worst performing sector with year to date losses in excess of 30%. The combination of heavily sold down prices and sharply lower bond yields saw bargain hunters moving back into the sector last week.
US Share Market (S&P 500) – up 6.45%, with the Dow (+5.39%) and Nasdaq (+7.49%) also up strongly and snapping 3 week losing streaks with last week’s rally recouping half of the June losses to date. All sectors bar Energy were higher with Consumer Discretionary, Healthcare and REITs leading the gains. It was a holiday shortened and fairly quite week on the economic data front although most of the data that was released pointed to a moderating of growth. Existing home sales for May were down 3.4% for the month but didn’t fall as much as expected with the median US house price rising above US$400k for first time, up 14.8% for the year. The June Manufacturing and Services PMI’s were both weaker than expected. The manufacturing PMI fell 4.6 points to 52.4 and a 23 month low while the services PMI fell by 1.8 points to 51.6 and a 5 month low. New home sales for May on the other hand were quite strong, up 10.7% for the month to 696k and well ahead of the 590k expected. US Federal Reserve Chair Powell’s semi-annual Humphrey-Hawkins testimony to congress was the highlight of the week with Powell emphasising the central bank is determined to bring down inflation stating “We have both the tools we need and the resolve it will take to restore price stability”. In questioning about the likelihood of a rate hike induced recession Powell said “It’s not our intended outcome at all, but it’s certainly a possibility” although a soft landing remains their goal but noted the challenges have increased significantly but thinks the economy is well positioned to handle higher rates. It seemed to be the Fed chair just raising the spectre of recession that sent bond yields tumbling and equities higher for the week.
Apple (AAPL) Air Tags of to a strong start. Apple recently launched their new blue tooth item trackers, Air Tags, and has been a big success according to one analyst. Apple has sold millions of Air Tags last year and that number is expected to grow 75% this year. Air Tags can be attached to keys, backpack or purse, etc and an iPhone can locate it if it’s ever lost. Apple devices owned by other people can also help find the lost item thanks to the “Find My” network, any iPhone, iPad or Mac can locate an Air Tag and automatically and anonymously notify the owner of the location. Apple shipped 20 million Air Tags in 2021, the first year it was available. The analyst report estimates Apple will ship 35 million Air Tags by the end of 2022.
Amazon (AMZN) to begin Prime Air drone deliveries later this year. Amazon announced last week that it will begin its Prime Air drone deliveries later this year, a delivery service they have been working on for almost a decade. The service will initially be available only in Lockeford, California and will use feedback from the service to improve operations before rolling it out further. In order to fly delivery drones in the U.S. companies need FAA approval with Amazon one of only three firms that has received Part 135 certification. According to an Amazon blog post “Once onboarded, customers will see Prime Air-eligible items on Amazon. They will place an order as they normally would and receive an estimated arrival time with a status tracker for their order. For these deliveries, the drone will fly to the designated delivery location, descend to the customer’s backyard, and hover at a safe height. It will then safely release the package and rise back up to altitude.”
CSL’s (CSL) flu vaccine gets preferentially recommended status for Adults 65 and Older. CSL subsidiary Seqirus announced last week that the U.S. CDC advisory committee has included their Fluad Quadrivalent vaccine as a preferentially recommended seasonal influenza vaccine for adults 65 years of age and older. Seqirus is a global leader in influenza prevention with 225 million doses of Fluad distributed worldwide and licensed in over 30 countries since it was first approved in 1997. Fluad Quadrivalent is specifically created for adults 65 years and older using Seqirus’ adjuvant, designed to help strengthen, broaden and lengthen the immune response to influenza vaccination. Approximately 80 percent of influenza-related deaths and 50 to 70 percent of influenza-related hospitalizations occur among adults 65 years and older according to the CDC.
The Week Ahead
Domestic data this week includes retail sales on Wednesday, private sector credit Thursday, and the AIG manufacturing index Friday.
Internationally the data picks back up with some key inflation reports from the Eurozone and US and US GDP the likely focus. Tonight we have US durable goods, with pending home sales, wholesale inventories and case-shiller home prices tomorrow. Wednesday we have US consumer confidence, Japan trade balance, Eurozone consumer confidence, US GDP and Eurozone inflation data. Thursday sees China manufacturing and services PMI’s, UK GDP, Eurozone unemployment and US personal consumption expenditure. Friday sees Japan unemployment and Tankan manufacturing index and Eurozone manufacturing PMI data.
Saward Dawson Wealth Advisors Pty Ltd, a Corporate Authorised Representative of Akambo Pty Ltd t/a Accountants Private Advice
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